Progressive offers gap insurance to policyholders with financed or leased vehicles. If your car is totaled or stolen and your loan balance is greater than the value of your car, gap coverage will pay for the difference.

This type of

car insurance

coverage can be difficult to understand, so we’ve created a guide to Progressive’s gap insurance offerings. We’ll look at how gap insurance works, whether you should buy it from a dealership or your insurance provider, and how much it could raise your insurance rates.

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Does Progressive offer gap insurance?

Yes, Progressive sells gap insurance.

Gap insurance

, or Guaranteed Asset Protection, protects you from depreciation when your financed or leased vehicle is stolen or totaled by covering the “gap” between the

actual cash value (ACV)

of the vehicle and the amount due on your loan or lease.

Because new vehicles lose value quickly, it’s common to owe more than the vehicle is worth in the early period of your loan term—and in the event of theft or a

total loss

, your comprehensive and collision coverage will only cover the car’s actual cash value. Without gap insurance, you could end up owing money on a car you no longer have, especially if you had a smaller down payment or a longer loan term.

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How does gap insurance work with Progressive?

You can purchase gap insurance from Progressive as an affordable add-on if you have full coverage (i.e. collision and comprehensive coverage). Because gap insurance covers the difference between your comprehensive/collision payout and your remaining loan balance, it doesn’t make sense to purchase it unless you have both types of insurance coverage.

With a Progressive gap insurance policy, if your new car is totaled or stolen you can file a claim to cover the difference between the vehicle’s ACV and the remainder due on your car loan. Here’s how it works.

Let’s say you recently financed a new vehicle worth $30,000. After a 10% down payment, you took out a loan for $27,000—and to protect your investment, you added gap insurance to your full-coverage Progressive car insurance policy.

A few months later, you hit black ice and totaled the car. Thanks to depreciation, your new car has lost about 15% of its value, meaning your collision insurance will only cover the ACV of $25,500, minus your $1,000 deductible.

You file a collision claim and receive a $24,500 settlement, which leaves you with an outstanding loan balance of about $2,000.

You can submit copies of your loan agreement and the collision insurance settlement to Progressive in order to get the remainder of your loan balance covered.

Your Progressive gap insurance won’t pay for repairs to your vehicle or for a new car to replace the totaled vehicle—but it will protect you from negative equity on a vehicle you’re no longer driving.

If you’re not a current Progressive policyholder, you can add gap insurance to a new auto insurance policy by calling an agent or getting

car insurance quotes online

. If you’ve already got Progressive insurance, call your agent to ask about adding gap coverage to your policy.

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Gap insurance vs. loan/lease payoff coverage

In addition to gap insurance coverage, Progressive offers a similar type of insurance called “loan/lease payoff coverage.” While this coverage will also activate in the case of a total loss on a vehicle with an active lease or auto loan, it only covers up to 25% of your vehicle’s value. Depending on your loan amount, that might leave you with uncovered costs.

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Is it better to buy gap insurance from the dealership or your insurance company?

Car dealerships typically offer gap insurance as part of your purchase or loan agreement, especially if you’re

financing your vehicle through the dealership

. In some cases, gap insurance or a “gap waiver” will be included automatically in your paperwork unless you specifically decline the coverage. You can also purchase gap insurance through other lenders, such as a bank or credit union.

But it’s usually more expensive to buy gap insurance

through a dealership

or lender, for one very simple reason: you’ll pay interest on gap insurance if it’s included in your loan. Dealerships and lenders typically include gap insurance as a lump sum (usually between $400 and $700). That amount will be bundled into your loan balance and subject to interest along with the rest of your loan.

On the other hand, car insurance companies usually add a small monthly charge to your regular premiums for gap insurance. This charge is typically only a few dollars a month, for a total cost of between $20 and $40 per year.

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How do I know if I have gap insurance?

Is gap insurance worth it?

In most cases, gap insurance is a good investment. Auto insurance companies like Progressive don’t charge too much for this coverage, and it can protect you from unnecessary costs if your car is totaled or stolen.

Rising interest rates

and

longer loan terms

mean that more and more drivers owe more on their cars than they’re worth. That’s a precarious financial position to be in, and gap insurance is an affordable form of protection, especially if you purchase it through your insurance provider.

One more thing to keep in mind: while this type of auto insurance coverage isn’t required by law or by most auto loan lenders, it’s often required for leases—so check the terms of your agreement if you’re leasing.

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How to find the best gap insurance

Not every car insurance company offers gap insurance. For instance,

State Farm

and

GEICO

—the two other biggest car insurance providers in the U.S.—don’t sell gap insurance. To find out if Progressive’s gap coverage is the right option for you, compare quotes from at least three different providers that offer gap insurance to find the lowest rate for your driver profile.

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