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Last updated: May 15, 2024
The Best Gap Insurance | AutoInsurance.com 2024
The coverage you need when you drive off the lot.
Average Cost
• Full Coverage Monthly Premium: $125
• Monthly Cost to Add Gap: $3-5
Pros + Cons
✓ Includes new/better car replacement at no extra cost
✓ Stellar claims reputation
X Gap coverage not available in New York or North Carolina
Read our Erie Review.
Average Cost
• Full Coverage Monthly Premium: $150
• Monthly Cost to Add Gap: $2-$4
Pros + Cons
✓ Also offers new car replacement
✓ Strong claims process
X Lack of info on which states gap is available in
Read our Nationwide Review.
Average Cost
• Full Coverage Monthly Premium: $1,987
• Monthly Cost to Add Gap: $4-$5
Pros + Cons
✓ Widely available
✓ Offers new and better car replacement
X Mixed customer and claims satisfaction scores
Read our Liberty Mutual Review.
Table of Contents
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Congratulations, you’re taking home a brand-new car! While gap insurance coverage is not the most thrilling part of owning or leasing a vehicle, it’s often wise to purchase—without it, you could owe thousands of dollars in the event of a total loss.
We reviewed the best insurance companies that offer gap coverage, with details on pricing, availability, and claims satisfaction. Nearly every company on our list also offers new or better car replacement, a related coverage that pays for the cost of a replacement vehicle after a total loss.
We’ve also put together a guide to buying insurance for your new car, reviewed the best auto loans for new cars, and found the best auto insurance companies overall.
Editor’s Note (Last Updated: May 10, 2024) – We updated this list of the best car insurance companies for gap coverage to reflect the latest availability and pricing.
What is gap insurance?
Gap coverage pays for the difference between what you owe on your vehicle and your remaining loan balance in the event of a total loss.
It’s common wisdom that new cars begin to depreciate as soon as you drive them off the lot. According to Kelley Blue Book, a new vehicle loses 20 percent of its value within the first year.1 As a result, you might owe more on the car than it’s worth. But in the event of a total loss, you’re on the hook for the entire loan. That’s where gap coverage comes in.
For example: let’s say you owe $30,000 on your car when it’s totaled in an accident. Due to depreciation, the actual cash value (ACV) of your car is only $24,000. Without gap coverage, you are responsible for the $6,000 difference between your insurance payout and your remaining loan balance. But if you have gap coverage, it pays for that $6,000 balance, minus any deductible.
RELATED:
Our vehicle depreciation calculator estimates how much value your car has lost based on its age.
You can buy gap insurance from the dealership, your lender or credit union, your insurance company, or a standalone gap provider. Typically, it’s cheapest to add gap coverage to your policy through your insurance company. Not all companies offer gap coverage (for example, State Farm only offers it if your auto loan originated from a State Farm bank), but many do. Coverage details vary by company, which we’ll explore below.
Comparison of the Best Gap Insurance
| Company | Average annual cost for full coverage | Average monthly cost for full coverage | What the coverage is called | Average cost of adding gap to a policy | J.D. Power Claims Satisfaction Rating (average is 878 out of 1,000)2 |
|---|---|---|---|---|---|
| Erie | $1,495 | $125 | Auto Security | $3-$5/month | 902 (#2 overall) |
| Nationwide | $1,805 | $150 | Gap | $2-$4/month | 875 |
| Liberty Mutual | $1,987 | $166 | Gap | $4-$5/month | 866 |
| The Hartford/AARP | $2,316 | $193 | Gap | $8-$9/month | 877 |
| Travelers | $1,630 | $136 | Gap or Premier New Car Replacement | $3/month | 871 |
| Amica | $2,283 | $190 | Auto Loan/Lease Coverage | $6-$8/month | 909 (#1 overall) |
| Progressive | $1,891 | $158 | Loan/lease payoff | $5/month | 870 |
Detailed List of the Best Gap Insurance
What We Like Most:
- Low rates for teen drivers on a family policy
- High claims and customer service satisfaction
- Rate Lock options prevent premium increases, even after an accident
Erie offers gap insurance through its Auto Security endorsement, which typically adds $3 to $5 to your monthly premium.
Auto Security stands because in addition to gap coverage, you get new/better vehicle replacement without paying additional premiums. (Keep in mind, gap insurance only covers the remaining loan balance). Here’s what Auto Security provides:
- Lease/loan gap: The difference between what you owe and the actual cash value of the car.
- New vehicle replacement: If you’ve had your car for less than two years, Erie reimburses you the cost to replace it (minus any deductible).
- Better vehicle replacement: If you’ve had your car for more than two years, Erie pays to replace it with a comparable model that’s two years newer (minus any deductible).
In some states, Auto Security will also cover the penalties for terminating a lease early, up to $500. New/better car replacement is not available for leases, and Auto Security is not available in New York or North Carolina.
Erie is a regional insurer only available in a handful of states, but we like it for its competitive rates, quality coverage, and excellent claims handling reputation.
What We Like Most:
- Discounts for taking a defensive driver course
- Network of local agents
- Usage-based insurance program for low-mileage drivers
Nationwide offers gap insurance in certain states (though it doesn’t say which) for vehicles six years old or newer. Typically, adding gap coverage to your policy adds only $2 to $4 dollars to your monthly premium.
Customers can also purchase new car replacement or vehicle value upgrade, which pays for the cost of a replacement vehicle in the event of a total loss. Customers report this endorsement adds $5 or $6 to monthly premiums and that settlements take as little as two weeks.
We like Nationwide for its reputation for customer satisfaction, financial strength, and extra coverage offerings like pay-per-mile insurance.
TIP:
You can avoid being “upside down” on your loan, or owing more than what your car is worth, by not taking out too large of an auto loan. Our car affordability calculator helps you determine the price of a vehicle you can comfortably afford.
What We Like Most:
- Save up to 30 percent with driver monitoring program
- Cheap average rates
- Over 2,000 local agents throughout the U.S.
Liberty Mutual offers gap coverage for about $4 to $5 monthly. You must be the first owner and purchase this coverage when you buy or lease the car.
For vehicles that are not leased, Liberty Mutual also offers new car replacement and better car replacement:
- New car replacement: For vehicles less than one year old and with fewer than 15,000 miles, Liberty Mutual will pay for a replacement of the same make and model in the event of a total loss.
- Better car replacement: In the event of a total loss, Liberty Mutual will replace your vehicle with a vehicle that is one model year newer and has 15,000 fewer miles.
Its claims and customer satisfaction scores are mixed, but Liberty Mutual’s rates are affordable and it is widely available across the country.
What We Like Most:
- Coverage available in all states
- Mechanical breakdown insurance available
- Discounts for three years if you take a driver safety course
Drivers over age 50 can get insurance from AARP through its partnership with The Hartford. For around $8 or $9 monthly, you can add gap coverage to your policy with The Hartford. You must be the original owner or leaseholder of the vehicle, and you must add the coverage within 30 days of leasing or financing.
The Hartford also offers new car replacement, which pays to replace a totaled new car with one of the same make, model, and equipment, with no deductions for depreciation.
The Hartford’s premiums are a little higher than average, but AARP members can take advantage of discounts that may lower premiums significantly. Take note that The Hartford is no longer selling new policies, including gap insurance, in California.
What We Like Most:
- High financial strength rating from AM Best
- Great customer service reviews
- Discounts for safe drivers, homeowners, electric vehicle owners, and more
For as little as $3 monthly, you can add gap insurance to your Travelers policy. To qualify, you must be the original owner/leaseholder and purchase the car from a dealer.
In addition, within the first five years of owning a new car, Travelers offers a coverage package called Premier New Car Replacement. In order to purchase the package, your vehicle must be the current or future model year. Premier New Car Replacement includes:
- Gap coverage
- New car replacement of the same make and model (minus any deductible)
- Lower deductible for a glass-only loss (windshield, windows, and exterior lights/mirrors)
Depending on your needs, budget, and vehicle, you can decide whether you want to purchase just gap insurance or the premier package.
We like Travelers for its array of discounts, including a new car (less than three years old) discount, hybrid/electric vehicle discount, and excellent bundling discount.
FYI:
You typically need comprehensive and collision coverage in order to purchase gap coverage.
What We Like Most:
- One of the highest-ranked midsize insurers for customer satisfaction
- Choose from traditional or dividend policies
- Bundle auto insurance with renters' or homeowners' insurance
Amica offers gap coverage for around $6 to $8 monthly. You must add the coverage within 30 days of financing or leasing your vehicle.
Amica also offers new car replacement for vehicles less than one year old with fewer than 15,000 miles.
While Amica’s premiums are higher than average, it offers some of the best customer and claims service available.
What We Like Most:
- Cheaper rates for drivers with a DUI
- Several ways to save if your premium increases
- Accident forgiveness automatically applies to policy in most states
Progressive does not sell gap insurance per se, but it offers a similar coverage called loan/lease payoff for an additional $5 monthly.
The major difference between loan/lease payoff and true gap coverage is that loan/lease payoff will only pay up to 25 percent of the vehicle’s value (and Progressive notes this limit may vary by state). For example, if the car is worth $20,000, Progressive will pay up to $5,000 toward the remaining loan balance.
While Progressive does not offer new car replacement, we like it for its wide availability and affordable rates, including for drivers with DUIs.
Gap Insurance FAQs
Who needs gap insurance?
You may need gap insurance if you leased or financed your vehicle and your lender requires it. According to the Insurance Information institute, it’s often a good idea to purchase gap insurance if you:3
- Put less than 20 percent down on the car
- Financed with a loan term of 60 months or more
- Purchased a vehicle that depreciates quickly, like a luxury car
- Have negative equity from an old car loan that you rolled over into the new loan
If any of the above are true, you may be “underwater” or “upside down” on your loan, meaning you owe more on the vehicle than it’s worth.
Is gap insurance actually worth it?
Gap insurance is worth it if your loan balance is higher than your car’s actual cash value. You can estimate your car’s value with online tools from Edmunds or Kelley Blue Book. In the event of a serious accident or theft, it can protect you from owing thousands of dollars on a totaled or stolen car.
If you own your car outright or owe less than its value, gap insurance is likely unnecessary. Ultimately, the decision to purchase gap insurance depends on individual circumstances and risk tolerance.
What is the difference between gap coverage and new car replacement?
Gap coverage helps you pay off any remaining balance on an auto loan or lease, while new car replacement pays for a replacement vehicle. Many people don’t have the funds to purchase a new car unexpectedly, which is why it’s often a good idea to purchase new car replacement along with gap coverage.
Is gap insurance required?
Gap insurance is not legally required by any state or federal law; however, it may be required by a lender or leasing company.
Methodology
We determined the best gap insurance by assessing over a dozen auto insurance companies on the following criteria:
- Pricing: We analyzed the cost of a full coverage policy with comprehensive and collision (required to purchase gap coverage), as well as the average cost of adding gap.
- Coverage options: We factored in the maximum payout a company’s gap coverage provides. We also prioritized companies that offer new and better car replacement, which often go hand-in-hand with gap coverage.
- Claims handling: A total loss is a stressful event, which is why we assess companies on how well they service claims.
- Customer satisfaction: We look at how easy it is to engage with a company to get a quote, buy a policy, make adjustments, and get questions answered.
We use the latest industry research and third-party ratings to evaluate auto insurance providers, as well as feedback from real customers. Read more about our editorial guidelines.
Citations
How To Beat Car Depreciation. Kelley Blue Book. (2023, Sep 11).
https://www.kbb.com/car-advice/how-to-beat-car-depreciation/Auto Insurers Manage Customer Expectations as Repair Cycle Times Double in Two Years, J.D. Power Finds. J.D. Power. (2023, Oct 26).
https://www.jdpower.com/business/press-releases/2023-us-auto-claims-satisfaction-studyWhat is gap insurance? Insurance Information Institute. (2024).
https://www.iii.org/article/what-gap-insurance
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