Average cost of gap insurance in 2025

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Gap insurance, also called loan or lease gap coverage, acts as a financial safety net for drivers who finance or lease a vehicle, covering the difference between the car’s actual cash value and the remaining loan or lease balance if the car is totaled due to an accident or theft.

Many major insurers, including State Farm, Progressive, and Allstate, offer this coverage for an additional cost, typically around $90 per year or $7.50 per month.

“Gap insurance is an optional coverage that is usually very reasonably priced, typically less than $100 per year in additional premium when added as an endorsement to your existing auto insurance policy,” says Mark Friedlander, director of corporate communications for the Insurance Information Institute (Triple-I), an insurance industry trade group. 

While gap insurance is relatively affordable for most vehicles, prices can vary widely from state to state. For example, adding gap insurance onto a policy may cost an additional $39 a year in Iowa but run as high as $204 in Missouri.

What is gap insurance? 

Gap insurance is an optional coverage that pays off your auto loan or lease if your car is totaled or stolen and the loan balance exceeds its depreciated value. It can be added to policies with comprehensive and collision coverage, which handle damage from accidents and non-collision events like theft or weather. Since cars depreciate quickly, owners may owe more than their vehicle’s worth, leaving them responsible for the difference if it’s totaled. Gap insurance covers this gap, ensuring you’re not stuck paying off a car you no longer have.

“When an accident or theft occurs, a driver usually gets paid out on the vehicle’s cash value from their standard insurance coverage,” says Richard Howe, owner of Howe Law, a law firm representing personal injury cases in Atlanta, Georgia. “However, without gap insurance, you will still be on the hook for the remaining amount in your agreement. Gap insurance provides peace of mind to drivers that they will be financially protected.”

This is particularly important in situations where the car’s value has depreciated significantly, leaving the owner with a balance higher than the payout from standard insurance.

“For instance, let’s say your car is totaled and the actual cash value is determined to be $15,000. However, you still owe $20,000 on your loan. Traditional auto insurance would only cover up to the actual cash value – leaving you with a $5,000 deficit,” says Howe. “But if you have gap insurance, this difference would be covered, relieving you of the financial burden.”

Estimate gap insurance rates in your state

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We only have Gap insurance rate data for 43 states; therefore, some states are missing from the list.

Florida

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• The average annual cost of a gap insurance policy in Florida is $2,757.
• With an annual rate of $2,288, Nationwide is the cheapest option in Florida.

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How much is gap insurance?

The amount you’ll pay for gap insurance varies based on factors such as your insurance provider, the make and model of your vehicle, the amount of your loan or lease, and even the state where you live.

Here’s a look at how rates vary nationwide with gap insurance.

Gap insurance rates for different vehicle types 

The type of vehicle you drive can significantly impact your gap insurance rate.

“Luxury cars, sports cars, and SUVs – typically with higher purchase prices – might also come with higher gap insurance premiums. That’s because these vehicles tend to depreciate at different rates compared to standard sedans or compact cars, posing a greater risk to insurers,” Howe says. 

The insured vehicle’s age will also play a critical role in calculating gap insurance rates.

“Newer vehicles, which depreciate more rapidly in the first few years, represent a higher risk for insurers offering gap coverage. As a result, a brand-new car might attract a higher gap insurance premium compared to a model that is several years old,” Howe says. “This reflects the insurer’s risk assessment, considering the steeper depreciation curve and the greater likelihood of a significant gap needing coverage soon after the purchase.”

How gap insurance saved these drivers thousands

Gap insurance can make a huge financial difference after a total loss. The following stories show just how valuable this coverage can be — especially when you need it most.

Several years ago, Jeremy and Rosaline purchased a new-to-them Chevy Trailblazer. The vehicle was a year old, and the dealer offered to sell them gap coverage for $500. They declined, believing that it wasn’t needed since it was a used vehicle.

The couple drove the vehicle for about a year, and then Jeremy was in a head-on collision that totaled the vehicle and landed him in the hospital. They owed on the Trailblazer about $9,000 more than their insurance company valued the SUV.

In their case, another driver was at fault for the accident, and the other party eventually compensated them for the $9,000. However, it required a lengthy court case, and the couple had to continue making monthly payments until a settlement was received.

For another example, consider Leslie’s case. She purchased a new Honda Odyssey, and her insurance agent suggested she add loan gap coverage to her policy. It cost $19 a month, but Leslie felt it was a smart move since she hadn’t put much down on the van.

Shortly after buying the van, Leslie was driving on a country road when a deer darted out in front of her. She swerved, went off the road, and hit a tree. She walked away from the accident with only minor injuries, but her insurer considered the van a total loss.

Since she had purchased the optional gap coverage, her insurer paid for the entire amount owed on her vehicle loan, even though it was $12,000 more than the van’s appraised value at the time of the crash.

How long does gap insurance last? 

Gap insurance is a good idea for as long as you’re still paying off a loan or lease, helping cover the difference between what you owe and your car’s depreciated value—until you owe less than the car is worth.

“[How long you should have] gap insurance coverage can vary based on several factors, including where you purchase the policy, the terms of your financing or lease agreement, and the specific policies of your insurance provider,” Howe says. “However, gap insurance is typically most relevant during the first few years of new car ownership.” 

This is when the gap between what you owe and your car’s decreasing value is at its widest.

“Most car buyers benefit from gap insurance when the vehicle is less than three model years old. This coverage is usually aligned with the duration of the car loan or lease, often making it unnecessary beyond a few years because the loan balance decreases to fall below the car’s actual cash value,” Howe says.

You can cancel gap coverage whenever you feel it’s no longer needed — usually once your loan balance is lower than your car’s actual cash value. Howe points out that some insurers also automatically end gap coverage after a certain number of years since the car’s value will eventually exceed the loan balance, making it unnecessary.

Where to buy gap insurance

You can buy gap insurance from a variety of providers, both national and regional. Here are some options to consider:

• Allstate
• American Family
• Amica
• Auto Club Enterprises (AAA)
• Auto Club Group – ACG (AAA)
• Auto-Owners
• CSAA Insurance (AAA)
• Erie Insurance
• Farmers
• Mercury Insurance
• Nationwide
• Progressive
• State Farm
• The Hartford
• Travelers
• USAA*

*USAA is only available to military members and their families.
Car dealerships and auto loan lenders also offer gap insurance. 

Is gap insurance worth the cost? 

Gap insurance is recommended so long as you have a loan or lease where there is a difference between what is owed and the depreciated value of your vehicle, according to Triple-I’s Friedlander. 

He recommends considering purchasing gap insurance if you have made less than a 20% down payment on the purchase of your vehicle, financed the purchase for 60 months or longer, are leasing the vehicle — gap insurance may actually be required under the terms of a lease agreement — or if you have rolled over negative equity from an old car loan into a new loan. 

When buying gap insurance, it pays to shop around and compare carriers and gap insurance quotes carefully. You may end up paying less than expected based on your age, gender, vehicle type and other factors.

Kat Tretina

 

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Kat Tretina is an insurance expert and freelance writer specializing in personal finance and insurance. Her work has appeared in top publications like U.S. News, Money.com and The Wall Street Journal’s Buy Side. She helps readers make informed decisions about money, budgeting and car insurance.