Gap Insurance in Arizona

Gap insurance applies only after your car is totaled or stolen. While technically not insurance, it covers the gap between your car’s actual cash value (ACV) and the amount you still owe on your auto loan or auto lease.

What It Covers

• Theft of entire vehicle
• An accident that totaled a vehicle, meaning the repairs cost more than the vehicle’s salvage value.¹

What It Doesn’t Cover

• Bodily injuries and other medical costs
• Collision or comprehensive deductible, typically
• Funeral costs
• Lost wages
• Missed car loan payments or late fees
• Total losses from mechanical issues, such as engine failures

Just how does gap insurance work in practice? Keep reading for an example.

Example

Imagine you’ve purchased a new car using an auto loan. The car is worth $40,000, and you put down $4,000, meaning you’re still on the hook for $36,000 plus interest. If you total the car and still owe $15,000 on the loan, you would pay your collision deductible (only around $500) and then your gap insurance would cover the remaining $14,500 left on your auto loan. Without gap insurance, though, you’d be responsible for paying the full amount out of pocket.

So, how much does gap insurance cost in Arizona? That depends on a number of factors.

By Vendor

The cheapest way to purchase gap insurance is as an add-on to a full-coverage car insurance policy. However, if you want it on its own, we recommend buying it from an insurance company, not a manufacturer, dealership or financial institution as those avenues will be much more costly.

By Company

Because a number of criteria affect the cost of car insurance, the cheapest provider for you may not be the same for someone else. In other words, take the average prices below with a grain of salt. You’d need to request a quote from the insurer to find out your specific cost.

By City

Where you live has a big impact on your average car insurance costs. For example, Phoenix has the highest costs in the state, which might have something to do with its population of 1.6 million people, making it the fifth-most populous city proper in the United States.² With more people and more cars on the road, accidents and other issues like car theft are more likely, so insurers charge more.

By Age

In general, car insurance is the cheapest for someone in their 40s and most expensive for young drivers with little driving experience.

Arizona requires only liability coverage, not gap insurance.³ Arizona Legislature House Bill 2674 explicitly says that gap insurance is not a type of insurance and is, therefore, not required by the state.⁴ That said, you’ll probably have to buy it anyway if you loan or lease your car due to the loan or lease company’s requirements.

The amount of gap insurance you get should be equal to your car’s price at the time of purchase, such as what you paid for it. Unless you have a classic car, which appreciates in value, regular cars lose value as soon as you drive them off the lot.

If your car’s ACV is less than the cost of repairs, your insurance company will declare it a total loss, and you’ll be left financially responsible for the remaining amount on your loan or lease. By having your car’s purchase price covered through gap insurance, you ensure you’ll be responsible for the deductible only and not the full balance.

Although gap insurance is a smart product to add to your auto insurance policy, it doesn’t make sense for all drivers. So, who is gap insurance best for?

The process of buying gap insurance can look a little different than getting car insurance, as you have more vendors to choose from.

When to Get Gap Insurance

It’s best to get gap insurance when you purchase your car and its insurance policy initially. That way, you can get coverage as soon as you drive your car off the lot as an accident can occur at any time.

Options

We recommend buying gap insurance as an add-on to your existing auto insurance policy if your provider has it as an option. If not, you can purchase it from your car’s manufacturer. We don’t recommend buying it from your car dealership or loan provider, as their rates tend to be much higher.

Cheapest and Best Gap Insurance Companies in Arizona

Some of the best and cheapest companies for gap insurance in Arizona include Auto-Owners, Travelers and Hartford Fire Insurance. Learn more about Travelers’ pricing.

With new car prices as high as they are, most people aren’t buying their cars outright but rather using loans or leases. If that’s the case for you, gap insurance is most certainly in your best interest, even in the state of Arizona. Learn more in our frequently asked questions below.