The moment you drive a vehicle off the dealer lot, its value depreciates. Unfortunately, what your insurance company will pay if your vehicle is stolen or totaled in an accident is its actual cash value, not what you owe on the car.
Reading: Who sells gap insurance coverage
Guaranteed auto (or asset) protection, also known as gap insurance, covers the “gap” between what you currently owe on your auto loan and what your insurance pays if your vehicle is damaged, totally lost, or lost. theft, minus your deductible. .
Many major auto insurance companies offer differential insurance, which some insurers refer to as loan/lease coverage. but you don’t have to buy it and, in fact, not all insurance companies offer it.
When you insure a new car, you can opt for gap coverage as an additional endorsement to your standard policy. but you must also have collision and comprehensive coverage.
In some states, auto dealers are required to offer differential insurance at the time of vehicle purchase and may include it as part of your auto loan. Another option is to check with your bank or credit union.
how does gap insurance work?
Gap insurance is sometimes called “loan/lease coverage.” Both coverages do the same thing: They cover the “gap,” or difference, if any, between your car’s actual cash value (ACV) and what you still owe on your vehicle if it’s stolen or totaled.
but loan/lease coverage may have further limitations and loan/lease gap coverage terms will vary based on guidelines set by the issuing company.
David Adler of Adler Insurance Group, a Denver-area insurance agency, says differential insurance can be a lifesaver for many drivers who haven’t yet paid for their car or are currently leasing one.
“This insurance add-on helps reimburse a car owner when the total loss payment is less than the outstanding loan/lease balance. gap insurance will cover the difference between your insurance payment and the remaining balance on your vehicle,” he says.
Below are the standard terms for a gap policy:
- Gap insurance is available through most insurance companies as an endorsement or add-on to your standard auto insurance.
- gap insurance provides coverage when a vehicle suffers a total loss.
- Difference insurance covers the difference between the actual cash value of the vehicle at the time of loss (less the deductible) and the amount owed on the loan or lease.
- Comprehensive and collision coverages are generally required.
- payment will not include unpaid finance charges, excess mileage, or other fees or expenses associated with the loan or lease.
- Typically, gap insurance will pay between five and 45 days after the claim.
- American family
- car owners
- csaa insurance group
- mutual freedom
- at the national level
- state farm
- united states
- Truth in Lending Law: Because gap insurance is voluntary in most states, this law specifies when finance charges can be excluded.
- State Standards: Dealers may only sell differential insurance to their customers through an insurance agent. a policy must also meet the requirements of each state.
“At a certain point, the difference between what you owe and the value of your car will shrink to a point where it no longer makes financial sense to have a gap policy,” he says. “so if you forget to cancel that add-on at that point, you’re essentially paying for insurance you no longer need.”
See our experts’ recommendations on what gap insurance is, what it covers, and if it’s worth it.
Which insurance providers sell differential insurance?
Below is a list of gap insurance providers based on 2022 research by carinsurance.com:
Most large insurance companies sell differential insurance as additional or additional coverage to your vehicle insurance policy. some offer it as stand-alone coverage, but not many.
In some cases, gap insurance may be called something catchier, but it works in the same or similar way. for example, us differential insurance. uu. is called “total loss protection” insurance, while state differential insurance is called “payment protector.”
These are some of the larger insurance companies that offer gap insurance and some pricing information:
american family auto insurance gets high marks from its customers. offers a variety of discounts and competitive prices for deficit insurance. To get a gap insurance quote, you’ll need to contact an agent; prices are not available online and vary from state to state. In general, expect to pay between $5 and $15 per month for gap coverage.
esurance will pay up to 25% of the actual cash value of your car if it is stolen or destroyed in an accident. that’s on the higher end for many insurers that offer gap insurance. Get a quote by phone or online.
You can get gap insurance from Liberty Mutual, averaging $5 to $15 per month.
nationwide does not disclose the average cost of gap insurance coverage unless you get a quote and must purchase comprehensive and collision coverage to get gap coverage.
progressive offers the lowest average rate at an average of $5 per month and pays a maximum of 25% above the value of your car if it is stolen or completely lost after an accident. Like most other companies, you must purchase comprehensive and collision coverage to purchase gap insurance from Progressive.
You can add loan/lease gap insurance coverage to your policy for approximately 5% of your vehicle’s comprehensive and collision premium, but your vehicle is only eligible if purchased directly from a new car dealer.
frequently asked questions: companies that offer gap insurance
does geico offer differential insurance?
geico does not offer gap insurance. If you have a Geico auto insurance policy and want gap insurance, you can purchase separate gap insurance from another insurer that sells it. Another option is to buy gap insurance from the dealer where you bought your car, but it will likely cost more than buying it from an insurance provider.
Is it possible to buy independent differential insurance?
You can purchase differential insurance separate from your standard auto insurance policy. Standalone gap coverage is different from standard gap insurance in that you must have comprehensive and collision coverage before your existing provider will sell you gap coverage.
Two providers that offer stand-alone gap coverage include:
easy care insurance
easycare offers separate gap insurance, which must be purchased when you purchase your vehicle. covers up to $50,000 of the gap between your loan or lease balance and your insurance settlement, covers up to 150% of your car’s value, and protects your vehicle for the term of your loan of up to seven years. easycare charges a one-time (undisclosed) fee that is included in your vehicle financing.
auto payment insurance
AutoPay stand-alone gap waivers cover vehicles up to $100,000 in value. the company offers terms of up to 84 months and for losses of up to $50,000. the auto pay gap also covers the value of your vehicle up to 150% msrp and your insurance deductible up to $1,000.
how much does differential insurance cost?
The Insurance Information Institute says differential insurance adds about $20 a year to your annual premium. The more expensive your vehicle is, the more you’ll pay in gap insurance. And how much you actually pay for gap insurance depends on where you buy it: It’s cheaper to buy coverage from an insurance company than from a bank or dealer.
“it is worth keeping in mind that differential insurance is an additional expense that is not advertised in the sticker price, original auto insurance quote, or initial loan quote from a bank/lender” says benjamin bruinekool, director at the western michigan insurance agency.
“is something considered an ‘up-sell’ when you sit down with the finance manager at a dealership or when signing papers with the bank, and can often catch buyers off guard if they’re not familiar.”
If you buy differential insurance from a dealer, you may have a high markup, according to consumer advocacy groups. some dealers increase the cost of differential insurance by about 150%. Thirty-eight dealers were found in one analysis to increase the price of differential insurance by an average of 300%, according to a report by the National Center for Consumer Law.
Check out our detailed guide to the cost of differential insurance: what can you expect to pay?
can i buy differential insurance online?
yes. If a company offers standard car insurance online, chances are you can also find gap insurance.
when should i buy gap insurance?
If you think you’ll be underwater and owe more on your car loan than the car is worth when you buy it, check gap insurance in the first few months so you don’t miss out.
Can differential insurance be taken out at any time?
You can usually buy gap coverage for a car, as long as you still have a lien on the vehicle.
what is a gap waiver?
A gap waiver eliminates your obligation to pay the difference between your car’s actual cash value, or ACV, and the remaining balance on your loan in the event of a total loss. Waivers are agreements made between borrowers and lenders and are often included in a loan agreement or lease.
what is the difference between gap insurance and agreed value insurance?
Agreed value insurance is a type of coverage offered by some companies that is similar to gap insurance. Under these plans, you and the insurance company determine the value of your vehicle. if you file a claim, you are entitled to the agreed value of the vehicle or the full amount required to repair the car, regardless of market depreciation.
Agreed value policies are typically for classic, antique, or specialty vehicles, or for a vehicle that is expected to appreciate rather than depreciate over time. may not be available for your vehicle. Insurers like chubb and aig offer agreed value insurance plans.
How is gap insurance regulated?
There are various state and federal regulations related to gap insurance.
learn more about auto insurance rates by state with an interactive map
- insurance information institute. “gap insurance”. accessed May 2022.
- national consumer law center. “Auto Add-Ons Add Up: How Dealer Discretion Leads to Excessive, Inconsistent, and Discriminatory Pricing.” accessed May 2022.
- control of the currency. “the truth in loans”. accessed May 2022.
- automatic payment. “AutoPay Independent Gap Exemptions”. accessed May 2022.
- easy care. “guaranteed asset protection”. accessed May 2022.