Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Jan 10, 2022

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The Lowdown

  • The cost of GAP insurance depends largely on where you purchase it from. GAP insurance from an auto insurance company costs about $30 annually, while the same coverage from a dealership can cost upwards of $500 with interest
  • GAP insurance is usually required if you’re leasing a vehicle
  • GAP insurance is ideal for drivers who are actively paying off the vehicle they’ve purchased because it covers the difference between what you paid for a car and what it’s worth after it leaves the lot

GAP insurance, which stands for guaranteed asset protection, helps you cover the difference between the market value of your vehicle and what it was worth before it left the lot. Basically, if your vehicle is totaled but you still owe money on the lease or loan, you’ll want GAP insurance.

Whether you buy it from a car dealer or an auto insurance company, GAP insurance could save you thousands if you get into an accident in a vehicle that you haven’t fully paid for. But how much does GAP insurance cost you?

With this guide, we’ll go over the cost of GAP insurance, show you where to buy gap insurance at an affordable price, and take a look at why you might want to purchase it for your new car or truck.

Once you know if GAP insurance is right for you, enter your ZIP code in the free online tool above to compare auto insurance rates and find a coverage option that’s right for you.

How much does GAP insurance cost?

GAP insurance’s cost varies depending on where you buy it from. Generally, GAP insurance from an insurance company will cost $30 per year on average, while GAP insurance from a dealership may cost upwards of $500.

It’s also important to keep in mind that GAP insurance is only valuable as long as the amount you owe on your vehicle exceeds the actual value of your car. As soon as you’ve paid off enough of your loan for your regular full coverage auto insurance to completely cover the cost of your totaled vehicle, you should contact your insurance company or dealership and ask about dropping your GAP coverage. This is when when GAP insurance does not pay off.

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Where can you buy GAP insurance?

While you can buy GAP insurance from dealerships, in most cases, you’ll want to look for GAP insurance from an auto insurance company as this is usually far less expensive. GAP insurance from dealerships (and banks) may also charge interest. Even the most seemingly affordable GAP insurance from a dealership could end up costing you more than coverage from an insurance company.

These major auto insurance companies all offer GAP insurance:

  • Progressive
  • GEICO
  • Allstate
  • Esurance
  • Travelers
  • The Hartford
  • Liberty Mutual
  • American Family
  • USAA
  • Nationwide

What is the best auto insurance company that offers GAP insurance?

As GAP insurance will likely be a temporary form of coverage, it probably shouldn’t be your first priority when comparing insurance companies. That said, many major insurers offer affordable GAP insurance coverage that will cost you far less than similar options from a dealership or bank.

The companies with the best auto insurance rates for you will vary based on your location, vehicle, and driving history. We recommend starting your search by looking at options from Progressive, GEICO, and Allstate as these are some of the largest auto insurance companies in the United States by market share.

Is GAP insurance worth it?

GAP insurance is almost certainly worth the modest increase to your yearly insurance payments if you want to be sure you’re getting back what you actually paid for your new car — as opposed to what it’s worth after it leaves the lot.

The table below will give you an idea of how much the value of your vehicle drops immediately after purchase.

New Car Depreciation ScenarioCash Value of Car
Brand new car cost $30,000
Car depreciation rate 11%
Actual cash value of car $26,700
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In the scenario above, you would essentially lose $3,000 even if your auto insurance completely covers your totaled car (and that’s before we take your deductible into account). If you’re still paying off your car, you’d be even worse off without GAP insurance, as you would now owe $3,000 and have no car to show for it.

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Who should purchase GAP insurance?

The Insurance Information Institute describes a few situations where GAP insurance would probably benefit a driver:

  • If you’ve made less than a 20% down payment on your new vehicle
  • If your vehicle is financed for 60 months or longer
  • If you’re leasing your vehicle (GAP insurance is generally a requirement in this case anyways)
  • If your vehicle depreciates faster than an average car or truck
  • If you’ve rolled over negative equity from one car loan to another

What to Remember About GAP Insurance

  • GAP insurance is usually required if your leasing a vehicle and is still a smart purchase if you owe money on your new car for a different reason. Without GAP insurance, you could end up paying thousands for a totaled vehicle
  • You should always purchase GAP insurance from an auto insurance company instead of a dealership or bank. By doing so, you’ll pay less overall and avoid the interest charged by dealerships
  • You don’t need GAP insurance if you’re not making payments on your vehicle. As soon as the value of your vehicle equals or exceeds the amount you owe on it, GAP insurance becomes an unnecessary expense

Now that we’ve taken a look at how much GAP insurance costs and who should purchase it, try our free online quote tool to compare companies and find the most affordable auto insurance coverage in your area.