Gap insurance typically costs $15 to $30 per month when bought as a standalone policy, though the exact price depends on your car's value, your age, where you live, and which insurance company you choose.
Gap insurance fills the gap between what you owe on a car loan and what the car is worth if it's totaled. If you finance or lease a car, your lender may require it. If you buy it yourself, the cost varies widely — some insurers charge as little as $10 a month, while others charge $40 or more. The best way to know your actual cost is to get quotes from multiple companies, since pricing differs significantly even for the same car and driver.
Many people buy gap insurance through their auto insurance company as an add-on to their existing policy, which is usually cheaper than buying it separately. Some dealerships also offer gap insurance at the time of purchase, though dealership prices tend to be higher than insurance company rates.
Key Takeaways
- Gap insurance costs between $15 and $30 per month on average, but your actual rate depends on your car's value, your age, location, and the insurance company you choose.
- Buying gap insurance through your auto insurance company as an add-on is usually cheaper than purchasing it separately or through a dealership.
- The amount you owe on your loan compared to your car's current value determines whether gap insurance makes financial sense for you.
- You can remove gap insurance once you owe less than your car is worth, which typically happens after two to three years of payments on a new car.
Why gap insurance costs vary so much between companies
Insurance companies price gap insurance based on risk. A newer car with a high loan balance is riskier to insure than an older car that's nearly paid off, so the monthly cost will be higher. Your age and driving history also matter — younger drivers and those with accidents on their record typically pay more. Where you live affects the price too, since some states have different insurance regulations and different rates of vehicle theft.
The insurance company's own pricing model is another factor. Some companies use complex algorithms that factor in your specific car model's depreciation rate, while others use simpler formulas. This is why two companies can quote you very different prices for the same car and driver. Getting quotes from at least three insurers gives you a real picture of what you'll actually pay.
How to get a quote for gap insurance
Call or visit the website of your current auto insurance company and ask for a quote on gap insurance as an add-on. You'll need to provide your vehicle identification number (VIN), the current loan balance, and the car's current market value. Most companies can give you a quote in minutes.
You can also contact other auto insurers directly — companies like State Farm, Geico, Progressive, and Allstate all offer gap insurance. When you call, have your VIN and loan information ready. Some insurers let you get a quote online without talking to an agent, while others require a phone call. Compare at least three quotes before deciding, since the monthly cost can differ by $10 or $15 between companies.
If you're buying a car from a dealership, the dealer will offer gap insurance at the point of sale. Ask the dealer for the monthly cost and compare it to what your insurance company quoted. Dealership gap insurance is often more expensive than insurance company rates, sometimes by $10 per month or more.
When gap insurance makes sense financially
Gap insurance is most useful when you owe significantly more than your car is worth — a situation called being "upside down" on your loan. This typically happens in the first two to three years after buying a new car, since new cars lose value quickly. If you put down less than 20 percent at purchase, you're more likely to be upside down early on.
You can check whether you're upside down by comparing your loan balance to your car's current market value. Use a free resource like Kelley Blue Book or NADA Guides to find your car's value, then check your loan statement for what you owe. If you owe more than the car is worth, gap insurance protects you from paying the difference out of pocket if the car is totaled.
If you're buying a used car or putting down a large down payment, you may not need gap insurance. Once you owe less than your car is worth — which usually happens after a few years — gap insurance becomes unnecessary and you can remove it from your policy to lower your monthly costs.
Gap insurance through your lender versus your insurance company
If you financed your car through a bank or credit union, ask whether they require gap insurance and whether they offer it. Some lenders require it as a condition of the loan. If your lender offers gap insurance, compare their price to what your auto insurance company charges. Lender-offered gap insurance is sometimes called "loan gap insurance" or "payment gap insurance."
Insurance company gap insurance and lender gap insurance work similarly — both cover the difference between what you owe and what the car is worth if it's totaled. The main difference is where you pay the premium. With insurance company gap insurance, you pay the monthly cost as part of your auto insurance bill. With lender gap insurance, the cost may be rolled into your monthly loan payment, which means you pay interest on it.
Paying through your insurance company is usually cheaper overall because you're not paying interest on the gap insurance premium. However, if your lender requires gap insurance and offers it at a reasonable rate, it may be simpler to buy it from them rather than switching to a different insurance company.
How to lower your gap insurance costs
The simplest way to lower your gap insurance cost is to increase your down payment when you buy the car. A larger down payment means you owe less relative to the car's value, which reduces the risk the insurance company is taking on. This can lower your monthly gap insurance cost or eliminate the need for it altogether.
You can also lower costs by bundling gap insurance with other auto insurance coverage through the same company. Many insurers offer discounts when you buy multiple types of coverage from them. Ask your insurance agent about bundling discounts or other ways to reduce your rate.
Once your loan balance drops below your car's market value — which you can check using Kelley Blue Book or NADA Guides — you can remove gap insurance from your policy. Contact your insurance company and ask them to drop the coverage. This typically takes effect on your next billing date and lowers your monthly premium when ready.
What gap insurance does and doesn't cover
Gap insurance covers only the difference between what you owe and what your car is worth if it's declared a total loss by your insurance company. It does not cover regular collision or comprehensive insurance, which you need separately. It also does not cover your deductible, late fees, or other charges on your loan.
Gap insurance only pays out if your car is totaled — meaning the cost to repair it exceeds a certain percentage of its value, usually 70 to 80 percent depending on your state and insurance company. If you get in an accident but the car is repairable, gap insurance does not explore. Your regular collision coverage handles that claim instead.
Frequently Asked Questions
Can I cancel gap insurance whenever I want?
Yes. You can remove gap insurance from your policy at any time by contacting your insurance company. However, it makes the most financial sense to keep it while you're upside down on your loan. Once you owe less than your car is worth, canceling it will lower your monthly premium without leaving you exposed to risk.
Do I need gap insurance if I'm leasing a car?
Most car leases include gap insurance automatically, so you typically do not need to buy it separately. Check your lease agreement or ask your leasing company to confirm. If gap insurance is not included, ask the leasing company to add it, since you're responsible for damage to a leased vehicle.
What happens if I don't have gap insurance and my car is totaled while I'm upside down?
Your insurance company will pay you the current market value of the car, and you'll be responsible for paying the difference between that amount and what you still owe on the loan. For example, if you owe $20,000 but the car is worth $15,000, you'll owe the lender $5,000 out of pocket.
Is gap insurance worth it if I'm putting down 30 percent?
It depends on how quickly your car depreciates. A 30 percent down payment reduces your risk of being upside down, but new cars lose value fastest in the first year. Check your car's value after six months using Kelley Blue Book, then compare it to your loan balance. If you're still upside down, gap insurance may still be worth the cost.
Can I buy gap insurance after I've already bought the car?
Yes. You can add gap insurance to your policy at any time by contacting your insurance company. However, some insurers have restrictions — for example, they may not sell gap insurance on cars older than a certain age or with more than a certain number of miles. Call your insurance company to ask whether you're still within the window to purchase it.