How do gap insurance work

But some insurers have requirements to purchase gap insurance, like the car needing to be no more than two or three model years old. But gap insurance through a dealer is typically more expensive. Just remember to shop around and get quotes from multiple insurance companies. Image: Smiling young woman driving car with window down. In a Nutshell Gap, or guaranteed asset protection, can help you cover the difference between what your insurance covers and the amount you owe on your auto loan in the event that your car is damaged, stolen or declared a total loss and you owe more than the car is worth.

Advertiser Disclosure We think it's important for you to understand how we make money. Make sure you have coverage during the transition if you switch providers. Some of the largest insurance companies that offer stand-alone gap insurance as add-ons to car insurance policies are:.

American Family. Liberty Mutual. Other companies may sell gap insurance or a similar policy as part of a loan or lease. To find the best company for you, compare car insurance rates with at least three insurers.

Prices and interest rates will vary, so always check with your dealer and car insurance company to accurately compare costs. Here are other alternatives to consider. This coverage helps pay for a new car of the same make and model, minus your deductible, to replace your vehicle with a new one.

Your insurer may offer better car replacement to cover your loan balance should worse come to worst. Key takeaways:. ZIP Code. Gap insurance covers what's owed on a car after a total loss. Nerdy tip: Drop gap coverage when your car loan is less than the current value of your car.

Online pricing guides like Edmunds or Kelley Blue Book can give you an idea of how much your car is worth. Insurers might not drop it automatically, so you may need to remove it. Here's how gap insurance works:. Gap coverage example. Loan left to be paid.

Current value of car. Comprehensive insurance pays. Some insurers require your vehicle to be brand new in order for you to purchase gap insurance.

That may mean:. If you're considering buying gap insurance, it's important to remember that this type of coverage may only be available if you're leasing or financing a new vehicle. Then, think about how much you owe on your auto loan versus the value of your car. You can get an estimate of what your car is worth by checking a site like Kelley Blue Book. Do you owe more than your car is worth? Could you afford to pay the difference out of pocket if your car is totaled?

Have questions about gap insurance? Contact a local agent ,who can help explain your options. What Is Collision Insurance? What Is Comprehensive Insurance? Retrieve a saved quote. Skip to main content Explore Allstate. Popular Searches. Allstate We help customers realize their hopes and dreams by providing the best products and services to protect them from life's uncertainties and prepare them for the future.

Skip to main content Toggle navigation Log in. Edit location. Select a product to get a quote. Register new account Pay your bill. Get your ID cards. Updated: June Gap insurance is an optional car insurance coverage that helps pay off your auto loan if your car is totaled or stolen and you owe more than the car's depreciated value.

Don't forget to think about your insurance needs. The coverage you had on your previous vehicle may not be sufficient for your new car. New car replacement coverage is one type of optional coverage you may want to consider. You may choose to purchase this in addition to the coverage you are required to buy.