How much is GAP insurance?

Every driver requires auto insurance coverage, but not every driver needs GAP insurance. Whether you need GAP insurance depends on the type of vehicle you drive and how you finance it.

Similarly, the costs of GAP coverage will depend on your vehicle, how you choose to finance it, you as a driver, and where you buy car insurance. Keep reading to learn if you need GAP insurance and start comparing quotes for free with companies in your neighborhood. 

How much does GAP insurance cost? 

Like other forms of auto insurance, the cost of GAP insurance will depend on your driving history and who you are as a driver. Your GAP insurance payments will also depend on vehicle type and your financial payment plan.

For example, if you lease a car, your leasing company may already include GAP insurance costs in your lease payment. However, the best payment indicator is the company you choose to purchase GAP insurance and what type of company it is.

What companies offer GAP insurance? 

You may purchase GAP insurance through auto insurance companies, car dealerships, and financial institutions that allow consumers to take out auto loans. Generally, buying GAP insurance through your car insurance company is the cheapest option out of the three.

If you purchase GAP insurance coverage from your current insurer, you’ll likely only see a small increase in your monthly rates. How much does GAP insurance cost by insurance companies? Most insurance companies do provide some form of this coverage. Scroll down to see how GAP insurance work with some of the best insurance companies.

Allstate

Allstate is one of the many major auto insurance companies that offer GAP insurance. If your auto insurance company is Allstate, their GAP coverage plan will cover the money you owe for a vehicle loan. However, depending on your policy, there may be a cap on how much Allstate will cover.

The average annual rates for GAP insurance by Allstate are about $40 a year.

Nationwide

Nationwide also offers a GAP insurance coverage plan. Like other insurers, Nationwide will require you to pay a deductible if you file a claim with your GAP insurance. While the company does not provide specifics on GAP insurance averages and rates, most car insurance companies offer rates between $20 to $40 a year.

State Farm

State Farm operates slightly differently compared to other auto insurance companies. State Farm GAP insurance goes by the name Payoff Protector. Even if your insurance is not through State Farm, you may use Payoff Protector as a GAP insurance plan.

However, State Farm’s version of GAP insurance will only accept drivers who have auto loans through State Farm-approving banks and credit unions. Once State Farm approves your lender, it will inform you of your GAP insurance rates.

Like Nationwide, sample State Farm GAP insurance rates are unavailable online. Instead, you must contact State Farm and ask for your unique rates.

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How much does GAP insurance cost through car dealerships? 

GAP insurance obtained from a car dealership is often the most expensive. Generally, GAP insurance supplied by a car dealership costs between $500 and $1,000 a year.

Most car dealerships also require you to pay a starting fee, which may cost several hundred dollars. Additionally, a car dealership’s GAP insurance can increase your loan’s interest rates if it includes GAP insurance costs. Therefore, not only will you pay the interest on your loan, but you will also pay for interest rates associated with your GAP insurance.

Sometimes, refunds may be available under certain conditions with GAP insurance bought from insurance companies. BUt there are no refunds associated with GAP insurance from car dealerships. For example, no Honda GAP insurance refund exists.

How much does GAP insurance cost by financial institution?

Although less expensive than going through a car dealership, GAP insurance obtained through credit unions or banks is still more costly than policies offered by auto insurance companies. Usually, financial institutions offer annual rates between $700 and $800. On top of being more expensive than GAP insurance from an insurance company, the interest rule applies to loans from financial institutions the same as it does to car dealership loans.

GAP Insurance Breakdown and How GAP Insurance Works 

GAP insurance is different from standard car insurance. Usually, drivers purchase GAP policies alongside their typical insurance policies when they are still paying off a car.

The “GAP” acronym stands for guaranteed auto protection. As the name implies, GAP insurance will protect you in the event of severe damage or loss of a vehicle that you have not completely paid off. For example, suppose you total your car. In that case, GAP insurance will help pay for the differentiation —  or “gap” — between the monetary value of your vehicle and the amount of money you still owe on its financing or lease.

If you are considering buying GAP insurance, consider the following scenarios. This coverage may be recommended for you if:

• You pay for your vehicle through a lease.
• Your down payment was less than 20% of the vehicle.
• You have negative equity from previous loans.
• Your finance plan requires you to make payments for several years.
• You put a lot of miles on your vehicle.
• Your vehicle loses value rapidly.

If you borrow money from an institution to pay for your vehicle and do not have GAP insurance, you will have to continue making loan payments out of pocket if your car is no longer driveable. Simply put, without GAP insurance in this scenario, you would have to pay for a vehicle you no longer use.

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Deciding if GAP Insurance Is Right for You  

GAP insurance payments average anywhere from a few dollars a month to several hundred. It all depends on your situation.

The only way to decide if GAP insurance is right for you is by reviewing your financial payment plans and your unique circumstances. In most cases, GAP insurance is worth the costs if you lease a car, have an auto loan, or make a low down payment on your vehicle.

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