Reasons to Buy GAP Insurance

Gap auto insurance will pay the difference between your total loss payment and your loan balance after a covered loss. The average cost of gap auto coverage is $1.67/mo.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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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 (BBB A+). 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 and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Jul 16, 2021

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Things to Remember...

  • GAP insurance helps cover the difference if you still owe money on a leased vehicle after insurance pays for an accident
  • GAP insurance is a wise purchase if you often rent brand new cars because the car depreciates in value quickly
  • GAP insurance is not available in every state, so make sure you do your research to see if you can purchase it

GAP insurance, or guaranteed auto protection, is an optional type of insurance coverage for your vehicle.

GAP insurance is best purchased if you owe more on your vehicle than it is actually worth after an accident.

Your car’s value decreases so quickly, so if you are financing or leasing your car there is a good chance that you will owe money to your lender for the price difference between its value and what you owe.

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Quick Decrease in Vehicle’s Value

One of the biggest reasons you should purchase GAP insurance is because the value of your car decreases quickly.

In fact, the minute you drive it off the car lot it is already worth quite a bit less than previously.

You may think that because you have collision and comprehensive insurance coverage on your vehicle that you will be fully covered after an accident, vandalism, or theft.

Unfortunately, this is not usually the case. Your insurance company bases its contribution on what the actual cash value is of your vehicle.

If you are curious as to what the cash value is of your car, one good source to find out what your vehicle is worth is the website for Kelley Blue Book.

The insurance company will cover the cost of replacement, minus your deductible, based on this value. If you owe more on the vehicle, you will owe the lender the difference, which can end up being thousands of dollars.

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Leasing a Vehicle

If you lease a vehicle, GAP insurance is almost always recommended. In fact, according to the Insurance Information Institute, some leasing companies will actually require you to carry GAP insurance in order to lease a vehicle from them.

GAP insurance is especially important if you lease a vehicle and don’t put much down as a down payment.

Your lease payments will usually not be enough to pay down your vehicle enough so that what you owe on it and what it is worth are equal.

GAP insurance will cover the difference in the case of a total loss.

Another reason to buy GAP insurance is that many car loans available are longer term. Having a longer time to pay off your car means more money is going to the interest and less to the principal amount.

This way will take you longer to decrease the balance owed on the car, even though the value is decreasing quickly.

If your lease time or finance period is for more than 60 months, GAP insurance would be a smart decision.

Cost of GAP Insurance

The cost of GAP insurance is not that much when you compare it to comprehensive and collision coverage. GAP insurance usually equals about five to six percent of your total premium.

Evaluate your situation and decide whether paying a bit extra for your car insurance rate is worth the benefits you would possibly receive from it.

One of the benefits of having GAP insurance is that it sometimes will also pay your insurance deductible.

Although some insurance companies offer a waived deductible with the purchase of GAP insurance, not all of them do.

Check with your insurance company to see if that is something that they offer. GAP insurance does not usually have a deductible associated with it.

Where to Purchase GAP Insurance

GAP insurance can be purchased from a couple of different places. Many insurance companies will offer this type of insurance coverage as an optional rider to your current policy.

GAP coverage is usually available through your lender. If you lease a car, GAP coverage may be required, although you don’t need to purchase it from the lender.

In most cases, if you choose to buy GAP insurance through your lender, the cost of will be included in the lease itself.

Often it will be referred to as a GAP waiver. GAP coverage will often cost more through your lender when compared to your insurance company.

Depending on your state’s insurance requirements, you do need to obtain the minimum insurance that your state mandates before you can purchase optional coverage such as GAP.

To find out what your state requires in terms of car insurance visit the National Association of Insurance Commissioners.

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