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Everything you need to know about Florida gap insurance

Friends driving in convertible car on mountainroad

Getting a new car is exciting but can also come with a lot of financial risk. With inflation and interest rates at an all-time high, new vehicles can depreciate fast. Whether your car is totaled in an accident or damaged in the latest Florida flood, your insurance policy will typically only pay for the actual cash value of your vehicle, regardless of the balance of your loan. If you end up underwater on your auto loan, you are still responsible for paying the remainder of your car loan balance—even if your vehicle is unsalvageable. Bankrate’s insurance editorial team will show you how Florida gap insurance could help you cover those costs.

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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. Gap insurance will pay the difference if your new car is totaled or stolen, and you owe more than the claim payout amount on your auto loan.

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 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 pay off that additional $4,000 owed on your loan.

How does gap insurance work in Florida?

Like every other state, gap insurance is not required in Florida. However, purchasing gap insurance may be worth considering in some cases where you are financing a new vehicle and it may also be required when you’re leasing a vehicle. Here are vital triggers to take note of, where you are more likely to have negative equity or become upside-down on a car loan:

  • 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.

One thing to remember is that gap insurance is different from new car replacement coverage. With gap insurance, when you file a claim with your auto insurer and your car is declared a total loss, your provider will pay your lender. On the other hand, new car replacement coverage helps you purchase a brand new vehicle of the same make and model, or may even pay more than the value of the original vehicle if a newer model is available. Some insurers will offer both coverage options, while others may only allow you to purchase one or the other.

When do you use gap insurance?

Gap insurance is only used if your car is declared a total loss before your gap coverage expires. Purchasing gap insurance will not help cover your vehicle’s regular repairs after an accident or engine failure.

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 coverages

Unlike other types of car insurance, gap insurance is considered an optional insurance coverage. It only covers you in certain situations, and it typically expires as your car ages. Comprehensive and collision insurance are also optional, but these coverage types are more widely available and are usually necessary to help cover repair costs of your vehicle from an incident. Comprehensive and collision coverage are also typically required by your lender if you finance your vehicle. Here’s how these insurance types compare:

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.

Where 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 your Florida car insurance may only increase by about $60 per year if you buy it as an endorsement to your auto insurance policy. 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 2023 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 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 slightly 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 2023 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

    • Florida gap insurance is not required. According to Florida’s car insurance laws, drivers may purchase gap insurance coverage as an optional add-on to their policy. However, drivers who still owe a lot on their auto loans may benefit from adding gap insurance.
    • Standalone gap insurance is offered by car insurance providers who specialize in gap-only coverage. Usually, you may want to purchase standalone gap insurance coverage if your current provider does not offer the type of coverage you’re looking for. However, buying a standalone policy may be more expensive than adding gap coverage to your existing policy. If gap insurance is a coverage you are interested in, inquire about the availability of gap endorsements when comparing car insurance quotes.
    • Drivers can cancel gap insurance, but the process varies by each insurance company. In most cases, you will need to speak with your insurance agent to cancel the additional coverage. In some cases, your coverage may have a fixed time before it expires. However, if you still have gap insurance, but your car is worth less than you owe on your loan, you may want to cancel the coverage.

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