How much is gap insurance per month from top insurers?

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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. 

The graph below shows how much gap insurance costs on average.

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. 

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 many factors when determining gap insurance premiums. Below are some factors affecting gap insurance costs.

• The car’s value. A more expensive vehicle is often more expensive to insure. 
• Loan balance. The difference between your vehicle’s value and the loan balance will significantly impact your costs. 
• Insurer pricing. Different insurers consider your situation differently, which means the same driver can find different rates across multiple insurance companies. 

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

Full coverage car insurance includes both collision and comprehensive coverage. While both of these coverages will help you pay to repair or replace your vehicle after an accident, the total payout you’ll receive from these policies is limited to the current value of your car. If you owe more than your vehicle is worth, you’ll be expected to repay the difference to your lender without the help of an insurance company. 

For drivers who owe more than the vehicle is worth, gap insurance is something to consider. It might be the right move if you want help paying off your loan after an accident. Ultimately, gap insurance provides additional protection for your wallet. 

Drivers who don’t owe more than the vehicle is worth don’t need to purchase gap insurance. 

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.

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.