Gap insurance pays the difference between the amount you owe on a loan or lease and an insurance check for a totaled or stolen car. We examined several gap insurance policies in order to give you the important details.

How does gap insurance work?

  • Gap insurance can be added to collision and comprehensive insurance.
  • If your car is stolen or totaled in an accident, you can make a claim on collision or comprehensive insurance (whichever applies).
  • You'll receive a check for the value of the vehicle, minus your deductible amount.
  • But even with the insurance check you could still owe money on a car loan or lease.
  • That's when you'd make a gap insurance claim. The gap insurer will pay the difference between the vehicle value and the amount still owed.

Cars are often considered "totaled" when the repair cost is more than a certain percentage of the vehicle's value. In many states a car is "totaled" when the repairs are greater than 75% of the car's value at the time of the accident.

Is gap insurance worth it?

You may want gap insurance if:

  • You have a large balance on a car loan. For example, if you financed most or all of the vehicle price or have a long loan term, you may have a large loan balance. The average car loan is $30,234 and the average loan term is almost 69 months, according to a 2017 report by Experian.
  • You lease a vehicle and would owe a large amount if you totaled the car.
  • You have a car loan on a vehicle that depreciates relatively fast. The average new car depreciates by 16.9% in the first year, according to ISeeCars.com. The vehicles with the fastest depreciation (dropping more than 36% in the first year) are the Cadillac CTS, Hyundai Genesis and Smart Fortwo.

Websites such as Edmunds, Kelley Blue Book and NADAguides can help you estimate vehicle value. Your insurance company may use its own methods for determining value if you total a car.

You don't need gap insurance if the balance of your car loan is less or close to the value of your vehicle.

Car depreciation over 5 years

What does gap insurance cover?

Here are examples of how gap insurance can help.


You sideswipe a fence, causing major damage to your car

You'd make a claim on your collision insurance for the totaled car. The payout will be the value of the vehicle minus your deductible. Gap insurance pays the difference between the value and the balance of your car loan or lease.


You hit a deer, causing major damage to your car

You'd make a claim on your comprehensive insurance for your totaled car. The payout will be the value of the vehicle minus your deductible. Gap insurance pays the difference between the value and the balance of your car loan or lease.


Your vehicle is stolen

You'd make a claim on your comprehensive insurance for the stolen car. Gap insurance pays the difference between the insurance check and the balance of your car loan or lease.


Someone else hits your car, causing major damage

You can make a claim on that person's liability insurance, since it's their fault. Their insurance company will pay you the value of your totaled vehicle. Gap insurance will pay the difference between that check and the balance of your car loan or lease.


Where to buy gap insurance

Gap insurance and similar products are available from:

  • Car loan providers: Your bank or car dealership may offer gap insurance or similar coverage when you take out a car loan.
  • Insurance companies: Some insurers sell gap insurance when you buy car insurance with collision and comprehensive coverage. It may be called auto loan/lease coverage, depending on the insurance company. Loan/lease coverage pays a percentage of your car's value (often up to 25%). If your car is worth $24,000, a 25% loan/lease policy would cover up to $6,000. If you purchase loan/lease coverage, make sure the percentage is enough to make up the difference between the amount you owe and the value of the car.
  • Companies selling stand-alone gap insurance: Some companies specialize in gap insurance, such as GapDirect.

Where to buy gap insurance

Here's a look at whether some of the nation's largest insurers offer gap insurance:

Allstate gap insurance

Allstate offers gap insurance.

American Family gap insurance

American Family offers gap insurance.

Esurance gap insurance

Esurance offers gap insurance that pays up to 25% of the car's actual cash value.

Geico gap insurance

Geico does not sell gap insurance.

Nationwide gap insurance

Nationwide offers gap insurance.

Progressive gap insurance

Progressive offers gap insurance.

State Farm gap insurance

State Farm doesn't offer gap insurance, but State Farm Bank offers Payoff Protector if you have a car loan through State Farm Bank. The cost is added to the car loan, will incur interest and will be folded into your monthly payments.

Travelers gap insurance

Travelers and some of its subsidiaries offer gap insurance, including The Standard Fire Insurance Co.

Gap insurance cost

Gap insurance is relatively inexpensive. If you buy it from your insurance company it typically costs about $20 a year, according to the Insurance Information Institute.

If you buy gap insurance through a car dealership, there's typically a flat fee of $500 to $700, according to United Policyholders, a consumer advocacy group.

What gap insurance doesn't cover

Even with gap insurance, you can find yourself with some out-of-pocket expenses. Gap insurance generally won't pay for:

  • The deductible on your collision or comprehensive claim.
  • Extended warranties you had purchased for the car.
  • Overdue payments on the loan or lease.
  • Late fees on the loan or lease.
  • Penalties you owe such as excess mileage fees on a lease.
  • Balances from previous loans that you rolled in.
  • Credit life insurance purchased when you bought the car.  Credit life covers a loan balance if you die. 

Certain luxury and sports cars might not be eligible for gap coverage, depending on the insurance company. For example, a First Colonial Insurance Co. gap insurance policy we examined excluded cars made by Bentley, Daewoo, Lamborghini, Lotus, Maserati, Mitsubishi and Rolls Royce.

In addition, not all vehicle types may be eligible for gap insurance, depending on the insurer. We examined policies that excluded classic and antique cars, RVs, motorcycles, trailers and ATVs.