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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Benjamin Carr was a licensed insurance agent in Georgia and has experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. Benji is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent Benji Carr

UPDATED: Mar 23, 2022

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To Sum It Up

  • GAP insurance pays the “gap” between what your car is worth and what you still owe on your auto loan or lease
  • How much GAP insurance costs depends on whether you buy it at the dealership or an insurance company
  • The best way to reduce GAP coverage costs is to shop around and look at insurance companies that offer it as an extra on your existing policy

You may think that, if your car is totaled or stolen, your insurance company will fully cover the cost. In reality, though, your insurance carrier may not cover as much as you think.

Cars depreciate rapidly, and there could be a big difference between how much the car is worth and how much you owe on your lease or loan. Without GAP insurance, car owners are left paying the remaining loan balance even if they can no longer drive the car. This makes it much harder to finance a replacement car because you’re already paying off an auto loan.

Read on to learn more about GAP insurance costs and whether it’s worth it.

How much is GAP insurance typically?

How much is GAP insurance per month? The average cost of GAP insurance is around 6% of your collision and comprehensive insurance rate. In many cases, this can be as little as $5 a month.

However, your insurance provider will work out the cost depending on your car’s actual cash value, your state of residence, and your claim history.

If you choose to get GAP insurance from the dealership where you purchase the car, this is usually charged as a lump sum fee of about $500. This will depend on the car’s cost, your state of residence, insurance history, and other personal circumstances.

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Which companies provide GAP insurance?

When shopping around for GAP insurance, you have four main options: car dealerships, banks, lenders, and insurance companies.

Dealerships typically charge a lump sum, while car insurance companies give you the option to pay a small cost each month. If you are worried about paying a significant chunk on top of any car loan deposits, insurance, or taxes, then using an insurance company is usually the most affordable auto insurance option.

Companies that offer GAP insurance include:

  • American Family
  • Allstate
  • Nationwide
  • Progressive

State Farm also offers a type of GAP insurance coverage, but it’s only for State Farm bank loans. 

While it might take some extra time, it’s well worth looking around for car insurance at different companies to compare quotes. 

How can GAP insurance help you save money on car repairs?

GAP insurance can’t help you save money on car repairs if your car is totaled. It’s only designed to cover the difference between what you owe on a loan and what the car is worth.

To save money on car repairs in the event of a collision or other damage, you will need to take out collision and comprehensive coverage on your insurance policy.

Is GAP insurance worth it on a new car?

New cars depreciate very quickly. That means it’s even more important to take out GAP insurance if you don’t make a large down payment. Once you drive away with your new car, it could lose as much as 10% of its value right away. Within the next 12 months of ownership, it could lose a further 10%, and that will keep depreciating. 

With a potentially large auto loan or lease and a fast-depreciating car, you’re in a risky spot if you get into a collision or your car is stolen. GAP insurance gives you peace of mind that you can pay off your large loan if the worst happens.

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How much is GAP insurance and is it worth it?

For many, GAP insurance is a no-brainer, especially if it only adds $5 a month to an existing premium. However, many people decide against it once their dealership quotes a big lump sum at the point of purchase.

Of course, you hope that you’ll never need to use GAP insurance. But, in the event of a major collision or theft, you will wish you had it. To get an affordable GAP insurance quote, the best thing you can do is shop around with different lenders and insurance companies and you will find the best value for your situation.