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Key takeaways
- Gap insurance may pay the remaining difference on your car loan if your vehicle is lost or stolen.
- Not all auto insurance carriers offer gap insurance.
- Some carriers offer standalone gap insurance.
Leasing a vehicle can be a financially risky endeavor. If something were to happen to the car before you finish paying it off, you could be stuck paying off a totaled car while also needing to buy a new one. Thankfully, there is a form of auto insurance coverage to help with exactly that risk. Florida gap insurance, formally called guaranteed asset protection, can help drivers who lease or finance a vehicle. This coverage kicks in when the covered car is declared a loss while still on lease or when you still owe a significant amount to a lender. When that happens, the gap coverage can pay the remainder of what is owed on the vehicle up to the coverage limit. Drivers in Florida who still owe money on their cars may want to consider adding gap coverage to their policies. Before making that decision, however, continue reading to learn what goes into gap coverage and when it could be helpful.
What is gap insurance?
Guaranteed Asset Protection, also known as gap insurance, is an optional coverage you can add to your auto insurance policy when adding a new vehicle to your policy. If your vehicle is financed or on a lease when declared a loss, then your gap coverage could cover whatever you owe that is not covered by the standard car insurance claim.
For example, let’s say you still owe $30,000 on your auto loan for your vehicle, but it has depreciated since you purchased it last year. If your vehicle is totaled and the current market value for your vehicle is $26,000, this is likely to be the amount you’ll receive from your insurance company (minus your deductible). That leaves you on the hook for $4,000 to your lender at a time when you’ll also need to replace your vehicle. In this example, gap insurance would help pay off that additional $4,000 owed on your loan.
How does gap insurance work in Florida?
Gap insurance functions fairly uniformly across all states. In Florida, the high average cost of auto coverage may be a significant factor when it comes to insuring a new vehicle. Some lenders require gap coverage, as well as full coverage, as part of the loan stipulations. If you’re more at risk of becoming upside-down on a car loan, then you may want to consider gap coverage and look out for the following risk indicators:
- You decide to put less than 20 percent down as a downpayment.
- You have an auto loan that is longer than 60 months, such as a 72 or 84-month loan.
- You have accepted a high interest rate.
- You have accepted a loan with front-loaded interest terms.
- You have rolled over a previous car loan balance into your current loan.
When it comes to used vehicles, gap insurance is less common. Although each car insurance company is different, many require that your car is less than two or three years old to purchase gap insurance. Your gap coverage could also expire after your car reaches a certain age. Some auto insurance companies may also require that you be the original owner of
the car. The best way to find out whether gap insurance works for your vehicle is to speak to an insurance agent.
It’s important to note another form of coverage that might help replace your vehicle if it’s a total loss. New car replacement coverage could help you with the cost of a new car in the event that your old one is totaled. The claim payout would go to you in that case. With gap coverage, the claim payout goes to your lender and covers only the remainder of what is owed on your totaled vehicle. Insurers have different rules regarding these coverage types, and not all will allow both types of coverage in one policy.
When do you use gap insurance?
Gap insurance kicks in when your car is on a lease or financed and declared a total loss. This coverage type does not help with repairs or anything less than a total loss. Even then, gap insurance will not replace or repair your car but will pay off the remainder of what you owe on it up to your gap coverage limit.
For example, let’s say you drive your new car off the lot and into a telephone pole, and your car is damaged beyond repair. You only made a 5 percent down payment on your auto loan, but your car would likely depreciate to about 91 percent of its value immediately, according to Edmunds. That means you would only receive 91 percent of your vehicle’s value from your auto insurer (minus your deductible), but you would owe 95 percent of its value to your lender. Gap coverage would help you pay off the difference.
Florida gap insurance vs. other coverage types
Florida gap insurance is just one of the optional types of coverage you are likely to be offered by your auto insurance carrier in Florida. Gap insurance is only utilized in the specific circumstances discussed above, as opposed to other types of option coverage, like comprehensive and collision insurance, which may offer a broader range of utility. If your vehicle is on a lease, you likely already require full coverage, which generally includes comprehensive and collision coverage. See how these different coverage types compare below:
| Gap insurance | Comprehensive | Collision | |
|---|---|---|---|
| What it covers | The remainder of the balance owed to the lender when a vehicle is stolen or totaled | Covers vehicle damage and loss from theft, hail, hitting an animal, and other non-collision events | Covers damage to your vehicle from a collision with another vehicle or property |
| Who offers it | Your dealership, lender or an auto insurance provider | Most insurance providers | Most insurance providers |
All three coverage types can be important for new vehicles, and insurers will require that you have comprehensive and collision coverage on your vehicle to add gap coverage.
How to buy Florida gap insurance
When purchasing a new car, you will likely be offered gap insurance by your lender or dealership. However, many major car insurance providers in Florida also offer gap insurance. The cost of gap insurance varies by provider, but considering that gap insurance through the dealership and lender is usually priced much higher and includes interest when built into your loan payment, opting for gap insurance through your car insurance company may be a good opportunity for savings.
Gap insurance companies in Florida
Some of the best car insurance companies offering gap coverage in Florida include:
- Allstate: Allstate offers gap insurance to policyholders who are the original owners or leaseholders of a new vehicle. The company also has an A+ financial strength rating from AM Best and is ranked highly in J.D. Power’s 2024 U.S. Auto Insurance Study for Florida.
- Liberty Mutual: To get gap coverage from Liberty Mutual, you must be the vehicle’s first owner and purchase the coverage at the same time as your vehicle. Liberty Mutual has an A financial strength rating from AM Best; however, it is ranked well below average by J.D. Power in Florida.
- Progressive: Once added to your policy, Progressive’s Gap insurance does not expire as long as your vehicle is insured with Progressive. When you no longer want gap coverage, it is important to remove this add-on from your policy. Progressive has an A+ financial strength rating from AM Best but is ranked below average for customer satisfaction by J.D. Power.
- Travelers: You must be the original owner and purchase your vehicle from a dealership to be eligible for gap coverage from Travelers. The insurer has an A++ financial strength rating from AM Best but ranks slightly below average in J.D. Power’s 2024 study for Florida.
In addition, although it does not offer traditional gap insurance, State Farm offers a similar program known as Payoff Protector for loans originated by State Farm Bank.
Frequently asked questions
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