Gap insurance in Georgia

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Gap stands for “guaranteed asset protection.” This is an optional type of auto insurance in Georgia typically discussed in connection with newer cars. Georgia gap coverage is designed to financially protect a driver’s loan obligations after an accident or other peril results in a total loss and the insurance payout is less than an outstanding loan on the vehicle.

What is gap insurance?

If you seriously damage or total your car in an accident, it is destroyed by fire, flood or other peril, or if it is stolen, gap insurance will cover any difference between the amount you are paid by your car insurance company for replacement costs and the total amount you owe on a loan for the vehicle. This financial shortfall exists because a typical auto insurance policy pays the car’s current value on the open market or the “depreciated value,” which can exceed the outstanding loan. This is particularly relevant if you are purchasing a brand new vehicle, which will depreciate in value significantly once it leaves the lot.

How does gap insurance work in Georgia?

Gap insurance does not assure full compensation in all situations. In Georgia, it is important to know precisely how, and in what situations, gap coverage comes into play.

Gap insurance does not apply to all vehicles; it typically covers brand new vehicles and those that are up to one model year old. Often, gap coverage will be purchased in conjunction with the actual car loan. Gap does not, for example, cover situations where you owe more on a loan because you have traded in a vehicle you still owe money on.

Gap coverage is really a very narrow form of car insurance coverage. It has nothing to do with securing new car replacement coverage. It will not help with rentals or towing, and is not an extended warranty. Gap doesn’t cover anything except the difference between the loan amount and the car’s value at the time of the claim.

When do you use gap insurance?

Gap insurance only comes into play when there is a total loss of your vehicle. This typically occurs as the result of an accident when your insurance carrier deems your car to be totaled, although other events can trigger gap coverage.

For example, if your car is stolen and not recovered, or destroyed in a tornado or other natural disaster, you will recover the market value of the car just like you would with a totaled vehicle from an accident. If this amount is less than an outstanding loan, gap coverage can make up the difference.

Gap insurance vs other coverages

Because gap insurance is a limited form of coverage for a specific situation, it should not be confused with liability coverage or the two other important forms of coverage: collision and comprehensive, which both protect you financially when your car is damaged within scope of repairs.

Gap insurance Comprehensive Collision
What it covers The difference between total loss recovery and outstanding loan on the vehicle. The cost of repair caused by events other than an accident such as natural disasters, fire, theft and vandalism. The cost of repair caused by a single vehicle accident or a collision with another vehicle.
Who offers it In Georgia, you can purchase gap coverage from the car dealer who sold the car, your lender or your auto insurer (if offered). Comprehensive coverage is a standard offering of most auto insurer policies. Collision coverage is a standard offering of most auto insurer policies.

Where to buy gap insurance in Georgia?

You can typically buy gap insurance from most of the top insurance companies in Georgia. Because car buyers frequently finance their purchases, gap insurance is commonly offered as a standard option by these companies.

Because both dealers and finance companies have a monetary interest in the vehicle, both lenders and dealers will also often sell gap insurance. Gap insurance is specifically excluded by statute from Georgia insurance government regulation. As a result, there is little restriction on these sales.

Gap insurance companies in Georgia

Not every auto insurance company in Georgia offers gap insurance coverage. Geico, for example, does not offer gap coverage to its policyholders. However, most of the largest auto insurers (by market share) do offer gap coverage in Georgia, as do dealerships and finance companies. Some specific examples include:

  • AAA: The carrier does offer gap coverage provided that the insured vehicle has full comprehensive and collision coverage. Additionally, if the insured vehicle is deemed a total loss, AAA waives up to $1,000 of the policy deductible.
  • Progressive: Progressive also provides gap insurance for those who also have comprehensive and collision coverage. Progressive offers “loan/lease payoff coverage” for an average cost of $5 a month.
  • State Farm: Although State Farm does not offer gap coverage as such, the carrier does offer a “Payoff Protector” option which offers gap protection to those with a car loan from a State Farm bank. A buyer is eligible even if the required full coverage is provided by another carrier.

Many dealerships offer gap coverage in Georgia such as:

  • Cobb County Toyota: Gap coverage can be included as part of an auto loan. This increases the monthly payment on the loan by a modest amount.
  • IQ Autos: IQ is present in Georgia as well as other locations nationally. It is a large dealership that offers a variety of gap options as part of its sales process.

Frequently asked questions

How much is gap insurance?

Gap insurance is usually available from your car insurance company, your vehicle lender or the dealership where the car was purchased. Typically, you will pay more from your lender or dealership compared to purchased through the dealership. Speak first to your auto insurance carrier, which may provide gap coverage for a nominal annual charge.

Is gap insurance required in Georgia?

Gap insurance is not included in the Georgia insurance laws and regulations and is not legally required. Despite this, it is generally recommended to research this option when acquiring coverage for a new car, particularly when the vehicle make and model has a reputation of depreciating rapidly.

Can I cancel my gap insurance coverage?

Yes, typically you will be able to cancel gap insurance if you feel that it is no longer required. This might occur when you are certain that your loan has been sufficiently reduced so that the outstanding balance is below the vehicle’s actual cash value. Be sure to check with your gap insurance provider to verify any cancellation requirements.

Written by
Rick Hoel
Insurance Contributor
Rick Hoel is an international business attorney and legal and insurance writer for Bankrate.com, Reviews.com and Accessibility.com. Over the last several years, he has covered topics dealing with personal and commercial insurance and technology and the law. Rick is General Counsel and Director of Risk Management and sits on the Board of Power Stow Americas Inc., a subsidiary of Power Stow A/S in Denmark, the world leader in the supply of tracked conveyor systems to the airline industry.
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