How Much Does Gap Insurance Cost?


Written by:  Howmuchisit.org Staff
Last Updated:  August 13, 2018

Gap insurance is a specific type of insurance that ensures the vehicle is paid off after an unforeseen accident, no matter what the remaining balance on the car loan or difference in value may be.

With gap insurance, policyholders can have peace of mind that there will be no financial burden from a vehicle’s total loss.  Gap insurance covers the difference between the value of your car and what you owe on it in case the car is declared a total loss by your insurance company due to fire, flood or storm damage, or if it is stolen.

How much does gap insurance cost?

The value of your vehicle will affect how much you pay for your gap insurance.  Another thing that comes into play is how much you owe on the vehicle. If you have a $30,000 car, but you put $20,000 down on it,  then a $10,000 difference remains.   Usually, you can expect to pay anywhere from $8 to $30 a month extra for your gap insurance.

Gap insurance premiums are roughly 5 to 6 percent of the premium for collision and comprehensive insurance you have on the car.  For example, a $1,400 annual premium with $450 to $550 of that typically for collision and comprehensive, gap insurance would cost anywhere $20 to $30.  The cost will go down along with the cost of collision and comprehensive as the vehicle gets older

If you were to pay the one-time fee, it could cost anywhere from $500 to $800.  For example, CarMax has said to charge about $400 for their gap insurance policy.

We called up and spoke with some representatives from larger companies and most were able to offer a “ballpark.”  Some were able to give averages, while others were able to offer what the most you would probably pay.  As mentioned above, it really depends on the premium and your car’s worth.

Bankrate.com said gap insurance could cost about $20 to $30 per year on a $1,400 annual premium.

According to Carinsurance.com, car insurance companies charge $20 per year, while lenders could charge $500 to $700.

TypeAverage Annual Price Range
Allstate Gap Insurance$50~
Geico Insurance Cost$29~
Nationwide Gap Insurance$60~
Progressive Gap Insurance$80~
State Farm Gap Insurance$36~
USAA Gap Insurance$69~

Gap insurance overview

Depending on the policy, gap insurance usually covers accidents and thefts, but all policies are not created equally.  Therefore, it is a good idea to figure out the coverage offered by the insurance company.  Consult with them to ensure that you know what’s going to be covered when you add the gap insurance to your policy.

This insurance will usually pay the difference between your car’s ACV and the remaining balance left on your car’s loan.

Unlike your standard car insurance policy, it won’t come with a deductible attached to it.

These policies can be purchased at the dealership, through a major insurance carrier or independent insurance agent.

Gap insurance can be purchased in two ways:  as a one-time upfront payment or it can be tied into your auto loan.

Gap insurance providers

What are the extra costs?

If you were to tie the gap insurance into your car loan, you will have to pay interest on it.

Tips to know:

If you already own your car and you have a lot of equity built into it, you probably won’t need gap insurance.

For those who either lease a vehicle or even finance for more than 60 months should highly consider something such as gap insurance.

For those who drive more than 20,000 miles annually, or if you are planning on putting less than 20 percent down, it is wise to consider gap insurance.

To know what your car is worth, check the NADA Guide.  If your loan is more than what your car is worth, then you may want to consider a policy.

Most will recommend you avoid purchasing from a dealership since many charges up to $1,000 as a one-time fee.

Gap insurance will only apply to your loan.  Once you pay off your loan, you will no longer need the coverage and you can get a refund if you paid off your loan early.  This can also apply if you were to sell your car early and/or refinance your loan.

State laws vary, but in most, you can purchase this type of policy on a used car.

Institutions generally won’t offer coverage to a private loan through an individual.  It will have to be through a financial institution.

Gap insurance can’t be transferred to another loan.

You can cancel gap insurance if you no longer need it.  Pay attention to the policies and terms to see how you can cancel.

How do I know if I have gap insurance?  If you don’t know if you have gap insurance, there are three things you can do:  you can either contact your insurance company, financial institution or the dealership you purchased from.  If possible, you can also log into your online accounts to view paperwork to see if gap insurance is included.

How can I save money?

Consult with the auto finance company where you obtained your car loan.  Many offer gap insurance for a cheaper premium and sometimes even free.

Look for companies that specialize only in gap insurance.  Review the terms of each policy.  From those insurance companies, compare prices and rates so you are guaranteed to find a good deal.  You need also to take into account the coverage offered.  Generally, as long as you compare at least three companies, you should be assured that you are going to get the best deal possible on your insurance.

How to save on gap insurance

Shop Around

Did you know that the average American can save upwards of $500 just by comparing?  Yes, comparing sounds rather simple but so many people don’t do it.  Take advantage of the Internet, and use car insurance comparison tools.  Set aside a few minutes of your day and get at least three to five quotes.  The kicker here is to make sure that you go directly to the source.  By doing so, you’ll weed out the middleman.

Be Aware of Discounts

Most, if not all car insurance providers offer a variety of discounts.  These discounts include good driver, loyalty, good grades and group discounts.  Don’t be afraid to ask the insurance company about all the discounts that are available.  They will probably ask you a few questions that relate to your personal situation and your car.  With your answers, they will be able to match you up with the best discounts available.  Aside from those discounts, also keep in mind that car insurance companies are more than happy to provide significant discounts to those that combine their other insurance policies such as their homeowner’s policy.

Higher Deductibles

By raising your deductible, this can help bring your premiums down by more than 35 percent.  As you probably know, the deductible will be the amount that you’ll be responsible for in case of an accident.  Increasing your deductible by $100 to $500 can bring your premium down drastically.  Increasing your deductible to as high as $1,000 can bring your premiums down by more than 45 percent.


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