You have probably heard that the moment you drive a brand new car off the lot, it is immediately worth less than what you may have paid. This is a vastly simplified way to explain a concept known as “vehicle depreciation.” If you financed a new vehicle, you could run the risk of having a loan that exceeds the depreciated value of the vehicle. While this in itself is not a dilemma that concerns Massachusetts drivers who prefer to own a new vehicle, it has more serious implications in the event of a costly accident.


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If you are at-fault in a crash that totals your new car, you will still owe your car payment to the lender, even if your car insurance payout does not cover the full new vehicle replacement cost. Gap insurance in Massachusetts is designed to protect you financially in this scenario. It is available for purchase from many of the top car insurance companies.

What is gap insurance?

Gap insurance is also known as loan or lease gap coverage, and is short for general asset protection. Gap insurance, as the name implies, covers the “gap” between the amount of money your insurance company pays you, if your vehicle is stolen or declared a loss, and the remaining balance of what you owe to a lender. Gap insurance in Massachusetts is supplemental coverage — it is not required but you have the option of adding it.

How does gap insurance work in Massachusetts?

To understand how gap insurance works in Massachusetts, it is important to address a few underlying clarifications. Massachusetts gap insurance does not apply to just any vehicle you financed for more than it is worth; it applies only to new vehicles — or one no more than one-year-old.

Secondly, gap insurance is not new car replacement insurance. It may help you pay off a loan on a new car but it does not provide the full funds to replace the vehicle with a new version. The amount covered by gap insurance gets sent directly to the lessor or lender.

To understand how gap insurance does work, consider the following scenario. Say you just purchased a new Ford SUV for $45,000. You chose to finance the vehicle, paying down the loan over five years. After six months, your Ford’s value drops and is now worth $36,000. However, you still owe roughly $42,000 on the loan.

If you caused an accident and your car was declared a total loss, your insurance carrier may only pay you the current value of $36,000. However, the lender is still owed the full $42,000 balance. If you did not have gap insurance in your policy, you would have to pay the difference of $6,000 out of pocket. On the other hand, say you did purchase gap coverage. The car insurance company pays the $6,000 difference to the lender so you can walk away from the totaled vehicle, under no outstanding loan obligation.

When do you use gap insurance?

Gap insurance is used when your new car or lease vehicle is declared a total loss or is gone because it was stolen, and it is necessary to cover the outstanding loan amount not covered by your policy’s replacement cost limits. It will not cover expenses or damages for your vehicle to get repaired. So if you plan on putting less than 20% down to pay for a new vehicle (the amount a car typically depreciates in the first year), then gap insurance might give you additional peace of mind.

Gap insurance vs other coverages

Gap insurance is often used in conjunction with other types of coverage. Here is a comparison of how each works.

Gap insurance Comprehensive Collision
What it covers The amount still owed after the insurance company pays out the vehicle’s actual cash value for a new or leased vehicle that was stolen or declared a total loss Covers losses, damages and repairs due to:
Animal collision
Falling objects
Covers losses, damages and repairs due to a crash or collision with another vehicle or a structure
Who offers it Many insurance companies
Finance companies
Car dealers
Most insurance companies Most insurance companies

Where to buy gap insurance in Massachusetts?

Gap insurance is not mandatory in Massachusetts. It is not standard coverage or included in your basic policy. It is supplemental and designed for short-term coverage when you buy a new vehicle or during a lease period. It is only needed for the initial period of your loan when you owe more on a loan than what the vehicle is worth. Because it is not a specialty coverage, gap insurance coverage is typically available through most car insurance companies.

If your current car insurance company does not offer gap insurance, you may also be able to purchase coverage through a vehicle dealer or finance company. However, gap insurance may be cheapest through your car insurance carrier when you add it to your current vehicle’s insurance policy.

Gap insurance companies in Massachusetts

Most major car insurance carriers offer gap coverage in Massachusetts, with a few exceptions, such as Geico. You can purchase gap insurance in Massachusetts from select carriers and car dealers:

Frequently asked questions

How much is gap insurance in Massachusetts?

The cost of gap insurance is nominal compared to how much you could end up having to pay out of pocket to close out a loan or lease after your vehicle is totaled. If purchased separately, the cost may be more than if you are able to include this coverage added to your existing policy.

Is gap insurance required in Massachusetts?

Gap insurance is not required in the state of Massachusetts. However, if you purchase or lease a new vehicle, your lender may require you to carry gap coverage. If not, it may be worth the small investment to save upwards of thousands of dollars in case your car is totaled while you owe more than it was worth.

How do you cancel gap insurance?

To cancel gap insurance, you would need to contact the company you purchased it through and let them know. You may have purchased coverage through your insurance provider, lender or car dealer, and depending on whether or not a length of coverage term applies, cancellation requirements may be in place.

Who needs gap insurance?

Gap insurance may be most beneficial to drivers who are planning on buying a new car and putting less than 20% down to finance it. In this case, it might be necessary to have gap insurance to make up for the difference if you end up owing more than the car is worth, in the event it is declared a total loss. In addition, some leasing companies may require you to buy gap coverage.