How much is gap insurance per month? See rates from top providers

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If you owe more than the car is worth and your full coverage car insurance policy pays out the vehicle’s actual cash value after an accident, you may be stuck with an outstanding debt. But if you carry gap insurance, your insurance company will pay the difference between the car’s value and what you owe. 

For many drivers, gap insurance provides a much-appreciated level of financial protection. The good news is that monthly gap insurance rates are relatively affordable. 

What is gap insurance and how does it work?

Because vehicles lose value over time, you could owe more on your loan than the car is worth. Gap insurance covers the difference between your remaining loan amount and the vehicle’s value. 

If your vehicle is totaled in an accident, full coverage car insurance will only pay out the vehicle’s value. You’ll be on the hook for the remaining balance without gap insurance. If you have gap insurance, the insurance company will pay the difference between your remaining loan balance and the vehicle’s value. 

The table below illustrates an example of how gap insurance works. 

How much does gap insurance cost?

Generally, gap insurance is relatively affordable. On average, gap insurance costs $7 per month. However, some insurers offer consistently lower rates than others. For example, Progressive and State Farm offer lower gap insurance costs than others. 

The table below shows the average monthly cost of gap insurance available through top insurers. 

Monthly gap insurance costs from leading insurers

Although gap insurance costs vary based on your situation, some insurance companies consistently offer relatively low rates to drivers. We look at some of the most affordable options from top insurance companies below. 

How much does gap insurance cost from Progressive?

The average monthly cost of gap insurance from Progressive is $4. That’s below the national monthly average of $7 and significantly lower than the average cost from other competitors, such as Erie, which costs $20 per month.

How much does gap insurance cost from State Farm?

The average monthly cost of gap insurance from State Farm is $4. That’s on par with Progressive and lower than the monthly national average of $7. 

How much does gap insurance cost from Auto-Owners?

Gap insurance costs an average of $5 per month from Auto-Owners. While that’s below the national average of $7 per month, it’s more expensive than other companies like Progressive or State Farm. 

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How much gap insurance costs by age

Age is one factor that impacts gap insurance costs. In general, younger drivers pay more for gap insurance than drivers with more experience behind the wheel. 

How much gap insurance costs for 18-year-olds

Overall, 18-year-olds tend to face the most expensive gap insurance costs, but location also matters. 

For example, 18-year-old drivers in Washington, D.C., can expect to pay $29 monthly for gap insurance. Meanwhile, 18-year-olds in Georgia pay an average of $14 per month for gap insurance. Notably, 18-year-old drivers in Montana pay an average of $54 per month for gap insurance. 

How much gap insurance costs for 25-year-olds

With more experience behind the wheel, 25-year-old drivers tend to pay less for gap insurance than 18-year-olds. For instance, 25-year-old drivers in Minnesota pay an average of $9 monthly for gap insurance, while 18-year-olds face a significantly higher average cost of $24 monthly.

How much gap insurance costs for 40-year-olds

Insurance companies usually offer relatively low rates to 40-year-olds, who often have decades of driving experience. These drivers generally pay the least for all kinds of car insurance, including gap insurance.

For example, 40-year-old drivers in West Virginia pay an average of $3 monthly for gap insurance. On the other end of the spectrum, 40-year-old drivers in Michigan pay an average of $12 per month for gap insurance. 

How much gap insurance costs for 65-year-olds

Rates for gap insurance tend to level out for 40-year-old drivers, with 65-year-old drivers facing similar rates. For example, 40-year-old drivers in West Virginia pay an average of $2 monthly for gap insurance. However, 40-year-old drivers in Michigan pay an average of $10 per month for gap insurance. 

Factors that influence the cost of gap insurance

Insurers consider several factors when determining gap insurance premiums. Below are some of the main variables that can affect how much you pay for coverage.

• The car’s value. A more expensive vehicle usually costs more to insure. Because newer and higher-value cars depreciate quickly, the potential “gap” between your loan balance and the car’s value can be larger — and that means a higher premium.
• Loan balance. The bigger the difference between your car’s value and what you owe, the greater your risk exposure — and the higher your potential gap insurance cost. Loans with little or no down payment, or longer loan terms, can increase this gap.
• Depreciation rate. Vehicles that lose value faster, such as certain luxury or electric models, often carry higher gap insurance costs because the gap widens more quickly.
• Insurer pricing. Each insurance company uses its own formula to calculate rates. That’s why the same driver may see different gap insurance premiums across insurers.
• Driving history. Drivers with clean records tend to get lower rates, while those with a history of claims or accidents may pay more.
• Location. Where you live affects your overall car insurance rates — and gap insurance is no exception. Areas with higher accident or theft rates can lead to higher costs.
• Vehicle use. Cars used for long daily commutes or business purposes can see slightly higher premiums due to increased risk exposure.
• Loan or lease terms. Leasing companies often require gap insurance, which can affect pricing. Similarly, loans with smaller down payments or higher interest rates may increase your overall risk, raising costs slightly.

Do I need gap insurance if I have full coverage car insurance?

Full coverage car insurance includes both collision and comprehensive coverage. While both help pay to repair or replace your vehicle after an accident, the total payout you’ll receive is limited to your car’s actual cash value — what it’s worth at the time of loss. If you owe more than that amount, you’ll have to cover the difference yourself.

For drivers who owe more than their vehicle’s value, gap insurance can be worth the cost. It ensures you aren’t left making payments on a car you can no longer drive and provides extra peace of mind for a relatively low monthly premium.

If you’ve paid down your loan balance or your car holds its value well, you may not need this additional coverage.

Not sure if you need it? Checking your loan balance against your car’s value is a good place to start — and the guidelines below can help you decide whether gap insurance makes sense for you.

You probably need gap insurance if:

• You made a small or no down payment on your car.
• You financed your vehicle for five years or longer.
• You lease your car (many lessors require gap insurance).
  
• Your car depreciates quickly or is a new model.
• You owe more on your loan than your car’s current market value.

You can likely skip gap insurance if:

• You own your vehicle outright.
• You made a large down payment.
• You owe less on your car than it’s currently worth.
• Your car is older or holds its value well.

Is gap insurance worth it?

“Gap insurance typically makes sense for those financing or leasing a vehicle,” says John Crist, founder of Prestizia Insurance. “If the vehicle is totaled and the payout does not cover the loan balance, gap insurance pays the difference. Those who own a vehicle outright or made a large down payment likely do not need gap insurance, as a total loss payout would cover what’s owed. Gap insurance also usually does not make sense for older vehicles where depreciation significantly reduces the value. The premiums may end up costing more than the payout.”

Before signing up for gap insurance, run the numbers to determine whether or not the numbers make sense for your situation. If you own an older vehicle or owe less than the vehicle is worth, then you can likely skip gap insurance.

What to know before skipping gap insurance

Gap insurance can be a smart, low-cost safeguard that prevents a financial setback if your car is totaled before your loan is paid off. For many drivers, the small monthly premium offers peace of mind knowing you won’t be left paying thousands out of pocket for a vehicle you can no longer drive. 

However, if your car’s value exceeds what you owe, it’s worth skipping the extra coverage and saving the money instead. The key is understanding your loan balance and choosing the right protection for your situation.

Sarah Sharkey

Contributing Researcher

 

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Sarah Sharkey is a personal finance writer with a master’s degree in management from the Hough School of Business at the University of Florida. She enjoys helping readers find money solutions that work. She has written for numerous personal-finance publications including Money Under 30 and The College Investor.