If you’re buying or leasing a new car, gap insurance can help cover the difference between what you owe on your loan or lease and your car’s actual cash value if it’s totaled or stolen. You can get gap coverage through a car dealer or your auto insurance company.
Where to Buy Gap Insurance
From the Dealer
Dealers often offer gap insurance when you discuss financing or leasing options. While convenient, dealer-provided gap insurance can be more expensive if the cost is rolled into your loan, since you’ll pay interest on the coverage.
From Your Auto Insurance Company
You can also add gap insurance to an existing or new auto insurance policy, as long as your loan or lease isn’t fully paid off. Buying from an insurer is often less expensive, and you won’t pay interest. Note that you need comprehensive and collision coverage to add gap insurance.
💡 Pro tip: Some insurers, like Progressive, offer loan/lease payoff coverage, which is similar to gap insurance but may have limits (e.g., up to 25% of the vehicle’s value depending on state rules).
Timing and Flexibility
- When to buy: Gap coverage can usually be purchased anytime while your loan or lease is active, though some insurers have time limits.
- Dropping coverage: You can remove gap insurance once your vehicle’s value exceeds your remaining loan balance, as the “gap” no longer exists.
Bottom line: Gap insurance protects you from paying out-of-pocket if your car is totaled or stolen. You can get it from dealers or insurance companies, but insurers may offer lower costs and more flexibility.
