The Top 5 Companies to Buy Gap Insurance From
Last Updated on September 14, 2023
Gap insurance provides an extra layer of protection for your vehicle.
Gap insurance covers the difference between the actual cash value of your vehicle and the amount you owe for that vehicle. On newer cars, this ‘gap’ can add up to thousands of dollars. That’s why many drivers have gap insurance. In fact, if you lease or finance your vehicle, gap insurance is required.
However, with so many gap insurance providers available, it’s hard to know which one is best for you.
Today, we’re highlighting the best five companies in the United States that offer gap insurance.
How Does Gap Insurance Work?
Gap insurance, also known as loan/lease insurance, covers the difference between the actual cash value of your vehicle and the amount you owe on that vehicle.
You’ve probably heard that a car depreciates sharply in value after driving it off the lot.
It’s true. If you buy a truck for $50,000, then that truck may be worth just $45,000 within two months of your purchase.
Now, let’s say you get into an accident within the first two months of purchasing your new truck. Your insurance will compensate you for the actual cash value of that truck, which is $45,000. However, you still owe $50,000 on your truck lease or loan. There’s a ‘gap’ of $5,000 between the actual cash value and the amount you paid.
Gap insurance covers this gap. In this case, insurance would usually pay you $45,000 for the actual cash value of your truck. If you have gap insurance, however, then you will receive $50,000 for your truck.
In summary, here’s how gap insurance works:
- Gap insurance covers a car you own, lease, or finance
- If your car gets totaled or stolen, you can make a claim under your comprehensive or collision insurance (depending on the cause)
- If you owe more on the loan or lease than the insurance payout for the totaled or stolen vehicle, then gap insurance will pay the difference
Best 5 Gap Insurance Companies in the United States
Not all companies offer gap insurance, and the companies that do offer it may not offer it nationwide. Here are the best insurance companies in America for gap insurance:
Progressive is the third-largest car insurance company in the United States. The company offers gap insurance, although it’s sometimes advertised as “loan/lease payoff insurance.”
Drivers can easily add gap insurance to their collision and comprehensive coverage. Progressive’s gap insurance is limited to 125% of your vehicle’s actual cash value. It may or may not cover your deductible, depending on your claim.
Overall, Progressive’s gap insurance minimizes the ‘gap’ between the actual cash value of your vehicle and the amount owing on that vehicle.
Allstate offers gap insurance in most states. Also known as guaranteed asset protection insurance, Allstate’s gap (or ‘GAP’) insurance is available for vehicles worth up to $100,000, although covered losses are limited to $50,000. That’s a higher amount than many of Allstate’s competitors.
Allstate’s gap insurance covers deductibles up to $1,000 as well, which can reduce your out-of-pocket expenses in the event of a total loss. If you crash a newer vehicle, then you might receive close to the full value of that vehicle in compensation without paying the deductible.
You can buy Allstate’s guaranteed asset protection insurance from dealers nationwide.
3. American Family
American Family offers gap insurance to customers in 19 states. As with other American Family insurance products, American Family gap insurance can be purchased through independent agents.
To qualify for American Family gap insurance, you first need to have an auto insurance policy with American Family. That policy needs to have collision and comprehensive coverage.
Amica has been ranked as one of the best car insurance companies in America in recent years. In fact, the company recently took home the top spot in the J.D. Power rankings, which analyzes data from car insurance customers across the United States. Specifically, Amica received the highest rating in J.D. Power’s 2019 customer satisfaction report for the New England region.
Amica has strong customer service, claims satisfaction, and financial stability ratings. It also has an extensive range of discounts and ways to save on your policy. The company is one of America’s few major providers to offer gap insurance.
Amica’s gap insurance works like the gap insurance offered by other companies here, covering the difference between the value of your vehicle and the amount you owe on that vehicle.
Nationwide is another major insurance provider that offers gap insurance. Gap insurance is an optional add-on available on certain vehicles.
Nationwide’s gap insurance can cover deductibles, theft, total loss, and negative equity. Like other gap insurance policies listed here, Nationwide’s gap insurance adds more protection to your car insurance.
Should I Buy Gap Insurance? Do I Need Gap Insurance?
Gap insurance can be useful in some situations. However, gap insurance does not cover everything, and it is not useful for all vehicles. Many vehicles also do not qualify for gap insurance: it’s typically only available on newer vehicles, for example.
Gap insurance can be useful in the following situations:
- You are leasing or financing a car (gap insurance may be required)
- You rolled negative equity from your last car loan into your new car loan
- You purchased a vehicle that decreases in value faster than other vehicles
- You made a down payment smaller than 20% on your vehicle
- Your car loan is longer than five years
Ultimately, it’s up to you to decide whether you want gap insurance based on your budget and aversion to risk.
Final Word – Best Companies for Gap Insurance
Gap insurance is a unique type of car insurance that covers the difference between the actual cash value of your vehicle and the amount you owe on that vehicle.
Typically, you buy gap insurance through your car dealership. Dealers like CarMax and Carvana offer gap insurance for a small annual fee. However, some insurance companies also offer gap insurance through dealership partnerships or independent insurance agents. You can check your insurance policy’s declarations page to determine whether or not you already have gap insurance.
Depending on your budget and aversion to risk, gap insurance may be the right choice for you.