Guaranteed asset protection (GAP) insurance is a valuable coverage option for Florida drivers with a car loan or lease. Due to Florida’s relatively high interest rates, new vehicles can depreciate quickly, often becoming worth less than the loan amount shortly after purchase. If your car is stolen or totaled, you may face out-of-pocket costs when settling the loan. GAP insurance is specifically designed to cover those expenses, providing financial protection in such situations.

Guaranteed Asset Protection, or GAP insurance, is an optional add-on to your auto insurance policy when you purchase a new vehicle. This coverage pays the difference if your car is totaled or stolen and you owe more on your auto loan than what the insurance payout covers.

For instance, if you owe $30,000 on your auto loan, but your vehicle has depreciated and is now worth only $26,000, that’s likely the payout you’d receive from your insurer (minus your deductible). This leaves you responsible for the $4,000 difference to your lender, even as you need to replace your vehicle. In this scenario, GAP insurance would cover that $4,000, helping you avoid additional financial strain.

Like in other states, GAP insurance is not mandatory in Florida. However, it can be beneficial if you’re financing a new vehicle, and it may be required for leases. Here are some situations where you’re more likely to encounter negative equity or become upside-down on a car loan:

  • Making a down payment of less than 20 percent
  • Taking out an auto loan longer than 60 months, such as 72 or 84 months
  • Accepting a high interest rate
  • Agreeing to front-loaded interest terms
  • Rolling over a previous car loan balance into the new loan

GAP insurance is less common for used vehicles. Many insurance companies require that your car is less than two or three years old to be eligible for GAP coverage, and it may expire once the vehicle reaches a certain age. Additionally, some insurers may stipulate that you must be the original owner of the car. The best way to determine if GAP insurance is right for your vehicle is to consult with an insurance agent.

It’s also important to note that GAP insurance differs from new car replacement coverage. With GAP insurance, if your car is declared a total loss, your insurer will pay your lender the remaining loan balance. In contrast, new car replacement coverage helps you buy a brand-new vehicle of the same make and model or may even cover more than the original vehicle’s value if a newer model is available. Some insurers offer both options, while others may provide only one.

Gap insurance applies only if your car is declared a total loss before your coverage expires. It does not cover regular repairs for accidents or mechanical failures.

For example, if you drive your new car into a telephone pole and it’s deemed beyond repair, having made only a 5 percent down payment, your car may depreciate to about 91 percent of its value immediately, according to Edmunds. This means you’d receive only 91 percent of your vehicle’s value from your insurer (minus your deductible), while owing 95 percent to your lender. In this situation, gap coverage would help you cover the difference.

Gap insurance is an optional coverage that isn’t offered by all insurers. It provides protection only in specific situations and generally expires as your vehicle ages. On the other hand, comprehensive and collision insurance are also optional but are more commonly available and essential for covering repair costs from incidents. Lenders usually require comprehensive and collision coverage if you finance your vehicle. Here’s a comparison of these insurance types:

Gap insuranceComprehensiveCollision
What it coversThe remainder of the balance owed to the lender when a vehicle is stolen or totaledCovers vehicle damage and loss from theft, hail, hitting an animal, and other non-collision eventsCovers damage to your vehicle from a collision with another vehicle or property
Who offers itYour dealership, lender or an auto insurance providerMost insurance providersMost insurance providers

All three coverage types are essential for new vehicles, and insurers typically require comprehensive and collision coverage in order to add gap insurance.

When buying a new car, your lender or dealership will likely offer you gap insurance. However, many major car insurance providers in Florida also provide this coverage. The cost of gap insurance can vary among providers, but purchasing it through your car insurance company may be more economical. Dealership and lender offerings tend to be priced higher and often include interest when added to your loan payment.

Here are some of the top car insurance companies in Florida that offer gap coverage:

  • Allstate: Allstate provides gap insurance for original owners or leaseholders of new vehicles. The company holds an A+ financial strength rating from AM Best and ranks highly in J.D. Power’s 2023 U.S. Auto Insurance Study for Florida.
  • Liberty Mutual: To obtain gap coverage from Liberty Mutual, you must be the vehicle’s first owner and purchase the coverage simultaneously with your vehicle. Liberty Mutual has an A financial strength rating from AM Best, but its ranking in Florida is below average according to J.D. Power.
  • Progressive: Progressive’s gap insurance remains active as long as your vehicle is insured with them. It’s crucial to remove this add-on when you no longer need it. Progressive boasts an A+ financial strength rating from AM Best but has a slightly below-average customer satisfaction ranking from J.D. Power.
  • Travelers: To qualify for gap coverage from Travelers, you need to be the original owner and purchase your vehicle from a dealership. Travelers has an A++ financial strength rating from AM Best, though it ranks slightly below average in J.D. Power’s 2023 study for Florida.

Additionally, while State Farm does not offer traditional gap insurance, it provides a similar program called Payoff Protector for loans issued by State Farm Bank.