Do I really need GAP insurance on a new car?

While you don’t need GAP insurance on a new car, it is in your best interest to at least compare GAP insurance quotes online if you’re financing a car. GAP insurance on a new car covers the difference between the value of your new car and what you still owe on your loan should your vehicle be totaled in an accident. Without GAP insurance coverage, you’ll be responsible for paying the rest of your loan out of pocket. Get free GAP insurance quotes with our quote comparison tool below.

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent

UPDATED: Oct 28, 2020

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Here's what you need to know...

  • There are many different types of insurance coverage available for your new vehicle. Some are legally required and some are not.
  • Some coverages such as GAP insurance coverage or comprehensive may be required by your bank or leasing company.
  • GAP insurance is an important financial tool as it pays the difference between what is still owed on the lease or loan and the cash value the auto insurance company is willing to pay out.
  • Without GAP car insurance, you are responsible for paying this difference.

Getting a new car is an exciting time of life. Whether it is your first new car or your 10th, there’s nothing like driving on a new set of wheels. Unfortunately, that excitement can be dampened by expensive car insurance premiums. If you need to find a less expensive premium, try using an online price comparison calculator.

Our quote tool is free, confidential, and fast. Just enter your zip code to get started!

What types of insurance do I need on my new car?


Car insurance is not only a form of financial protection for all drivers, it is also a legal requirement in nearly all areas of the United States. New cars and more expensive cars are even more important to protect with the appropriate types and amounts of insurance coverage as they are worth more.

Though not all coverages are required by law, the more coverage you have the better protected you are in case of an accident or another type of loss. Here are the basics of each type of coverage you can select:


Liability coverage is the minimum type of coverage legally required in most states. Property liability coverages damages you cause to other people’s cars, houses, or other real property with your car. Bodily injury liability also covers damages that you cause but for costs related injuries and death.

Drivers need to have a clear understanding that their own liability coverage will not pay for their own property damage or injuries. In order to have protection for yourself, you will need some of the additional coverage types below.

Medical Payments/Personal Injury Protection

Commonly referred to as PIP or med pay, this coverage is required in some states. Med pay covers medical expenses and lost wages for you and any of your injured passengers. In some cases, it may also pay for help, such as a housecleaning or childcare services, that is necessary due to your injuries or your passenger’s injuries

Uninsured Motorist

In the unfortunate case that you are in an automobile accident caused by another driver who is not insured, this type of insurance will pay for some or all of your damages. Uninsured motorist coverage is a legal mandate in some states. You may also be able to purchase underinsured motorist coverage that you can rely upon should the other driver’s policy limits be exhausted when it comes to your damages.

Collision Coverage


This optional coverage will pay for damages to your vehicle in the event that it is damaged in a collision with another vehicle or object. You can choose your deductible amount and your coverage limits. Keep in mind that, in general, the higher the deductible the lower your premiums will be.

Comprehensive Coverage

In short, comprehensive coverage is for damages to your vehicle that are not caused by a collision. Hitting wildlife, having your car stolen or vandalized, flooding, fires, and other natural disasters can all be circumstances covered with comprehensive insurance. This coverage is also optional and requires you to select your coverage amounts and deductible.

Glass Coverage

As one of the most common claims on auto insurance policies, some car insurance companies have separate glass policies. Some may have glass coverage with no deductibles or even low-cost deductibles. This coverage usually includes windshields and sunroofs as well as all other windows in the vehicle.

Rental Car Reimbursement


In the event that your car is temporarily not driveable or in the repair shop, rental car reimbursement can be a wise investment. It can also be useful if you will need to purchase a new vehicle in light of damages to your old vehicle.

Usually, rental reimbursement is good for up to 30 days and has a dollar limit per day. Some car insurance companies contract directly with rental car companies. This makes it easier on you as you do not have to wait for reimbursement and the two companies handle the payment between themselves.

Roadside Assistance

From time to time, all drivers need assistance on the road. It could be you ran out of gas looking for the closest gas station while on vacation, a flat tire, or keys locked in the car. It could even be some other type of breakdown.

No matter the issue, roadside assistance can give you piece of mind. Especially if you have an older car or unreliable car, this type of addition to your automobile insurance can be a lifesaver.

GAP Coverage

GAP coverage is required by most, if not all, leasing companies. While it is not required on vehicles that have active loans, it can be a wise investment. GAP coverage pays the difference between what is left on your auto loan or lease and what your auto insurance company pays out for your totaled vehicle.

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Do I really need GAP insurance on a new car?

If you lease your vehicle, the answer is yes. In fact, check your leasing contract because it is probably either already included in the price you pay for your lease or you are contractually obligated to obtain it. In this case, GAP insurance is like debt forgiveness.

If you have an auto loan, you are likely not required to have GAP coverage but it is a safety net. If there is a chance you could ever have negative equity on your vehicle that you still owe the bank for, it’s always a good idea to purchase GAP insurance.

How does GAP insurance work?


For example, you purchase a $20,000 vehicle with a loan. After religiously making payments for a year your loan balance is $16,000. You are then in a car accident and your car insurance carrier decides it is cheaper to pay out the cash value of the vehicle rather than pay to fix it.

They pay your loan company $13,500, which factors in your $500 deductible. There is now a $2,500 gap between what you owed on the loan and what your auto insurance carrier paid on it.

Under normal circumstances and without any GAP insurance on a car loan, you would be solely responsible for the remaining $2,500 owed to your auto loan company. Not paying it could damage your credit and prevent you from getting a car in the future and obtaining other forms of credit. If you have GAP insurance, the $2,500 debt you owe is paid and you walk away free and clear.

Risk Factors Requiring GAP Insurance

The following are risk factors indicating that you should probably consider purchasing GAP insurance if you are not already required to do so:

  • An extended term loan – While longer termed loans usually equal lower payments, it also means that you are slower in building equity in your vehicle.
  • Rate of depreciation – No car is immune from depreciation, though some depreciate faster than others. When purchasing a new car, you may want to research its rate of depreciation. Some estimates show that certain cars can lose up to 30 percent of value within as little as three months.
  • No money down or a small down payment – The more money you put down, the more equity you immediately have in your vehicle.
  • Obtaining a loan for more than your vehicle’s purchase price – Some car buyers will roll taxes, title, license, service plans, extended warranties, and other fees into their auto loans. This creates negative equity in your investment from the moment you sign on the dotted line.

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Using Your GAP Coverage

In the event that you do need to use your GAP insurance, it is important to make sure you are abiding by all of the terms of your lease contract, loan, and insurance policy. For example, some leasing contracts require you to keep paying your regular monthly car payment until they receive the GAP payment from the insurance carrier. Not carefully following any of these terms or conditions could lead to more headaches for you and a dent in your wallet.

Will I always need GAP coverage?


If you have your vehicle long enough, there will likely come a time when the balance of your lease or loan is below what your car is worth. At this time, if you can, it may be appropriate to drop GAP coverage as you no longer need it. Talk to your leasing company, bank, or insurance agent to learn more.

You may not have much control over the types of insurance you need to purchase for your new car, however, you can have some control over your policy premiums by using an online price comparison tool. These tools can help ensure that you are getting the best policy at the best price available.

Check out GAP insurance quotes from leading companies by entering your zip code in the box below!

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