Is State Farm Gap insurance worth it? (2025 Honest Review)

You might be thinking, “Is State Farm Gap insurance worth it?” This coverage is especially beneficial for drivers with leased or financed vehicles, as it helps protect against financial loss in the event of a total loss. State Farm offers Gap insurance at competitive rates, typically around $20 per month.

Gap insurance is valuable to your insurance portfolio, as it covers the difference between your vehicle’s value and the remaining loan balance. Understanding its benefits can help you decide if it’s right for you, which is why reading our State Farm car insurance review is essential.

Gap Auto Insurance Is Coverage That Protects Against Depreciation

With so many types of car insurance, why might you need another? Consider this nightmare scenario. You buy a new car and expect your ride to last for years. Then, catastrophe happens, and you get into an accident. Your car’s unsalvageable and totaled. Yet you took out a hefty loan to purchase the car. Now, you’re stuck with years of payments for a vehicle that’s essentially worthless. What to do?

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Gap auto insurance (otherwise known as guaranteed asset protection insurance) is designed as your go-to solution for this problematic scenario. While you may get funds back when your car is declared a total loss, that price tag will rarely match the amount you paid. As soon as you drive a vehicle off the lot, it depreciates.

After just a few months, your car could be worth thousands of dollars less. Despite this depreciation, the amount of your loan remains the same, and your monthly payments will not make up the difference in value for some time.

Gap insurance is essential because it covers the difference between your car’s current value and the loan amount owed, especially for higher-end vehicles where this Gap can grow quickly. When looking at options like the ten popular cars worth more used than new, it’s crucial to remember that Gap insurance operates separately from standard coverage and is sometimes referred to as loan or lease insurance.

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State Farm Offers Gap Insurance

The company does not offer traditional Gap stand-alone insurance. State Farm does, however, offer a program with the same basic structure called Payoff Protection. Enrollment in this program is available for customers who finance their cars with State Farm Bank. Cars used as collateral for a State Farm loan are covered as well. The program will offer coverage for car accidents or theft.

For example, if you received a $45,000 payout for your car but you took out a loan for $50,000, the Payoff Protection will pay $5,000. Remember, however, that you must have a loan in good standing to maintain eligibility. In addition, keep in mind that your location may impact eligibility for this program. Contacting a local branch for specific rules and restrictions is your best option.

Benefits of Gap Insurance

Individual circumstances are essential in a cost-benefit analysis of whether you should buy Gap insurance. Certain situations naturally lend themselves to this type of coverage. For one, Gap auto insurance is often required if you are leasing a vehicle and will be giving it back to the owner after a certain period.

Many financers also mandate Gap insurance. Even if you are not required to buy Gap insurance, it can still work for you. This is especially true if the cost of your loan will rapidly outpace the worth of your vehicle, which is known as negative equity. For example, if your make or model depreciates and loses value quickly, Gap auto insurance can help you offset potential losses.

The same rationale applies if you have a long-term loan (five-plus years) or only made a small down payment of around 20% or less for your car. Risk aversion will likely play a role in your decision as well. Insurance companies have long rated potential customers based on their accident risk.

Potential Drawbacks of Gap Insurance

At times, the cost of Gap insurance may outweigh the benefits. This may be the case if the policy has limitations, such as not covering your insurance deductible or capping the total amount of payout you can receive. Before you consider any provider’s Gap coverage or Gap-adjacent coverage, you should thoroughly evaluate the details of the policy and read the fine print for exclusions.

Speaking of exclusions, you may be disqualified from coverage in some cases. For instance, providers may not offer Gap coverage for high-priced cars in the six-figure range. You’re also less likely to qualify if you have an older car.

Even if you meet the qualifications, the cost of Gap auto insurance could be higher if you or your vehicle are deemed high-risk, and a low credit score may also affect your premiums. However, in certain states, insurers are not allowed to consider credit scores. Should you refinance your car loan? It’s important to keep reading to learn how these factors might impact your coverage.

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Benefits of State Farm Gap Insurance

You now know some of the reasons why Gap insurance might work for your situation. But can State Farm Gap insurance, or Payoff Protection, stand apart from competitor programs? In short, the answer is yes.

The company ranks as one of the top auto insurers in the United States, both in number of customers and rates of customer satisfaction. This solid reputation enables State Farm to offer cost-saving benefits for its client base such as bundling options wherein you can merge auto insurance payments with other types of insurance such as health insurance or homeowners insurance.

Knowing a company’s financial strength assures that your claims are likely to be honored and allows for flexibility with a less-than-perfect driving record. If you’ve had an accident, you may find lower rates than with competitors. This information is crucial regarding distracted driving, as it highlights how insurers manage your situation and associated costs.

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State Farm Gap Insurance Is Worth It

As discussed above, the answer to this question will not be the same for everyone. Your circumstances will help you arrive at the best answer. If you have a quickly depreciating new vehicle or a long-term loan on that vehicle, then Gap auto insurance could prove to be an excellent investment.

Likewise, this added insurance can save your sanity on the road if you have a low-risk tolerance level. On the other hand, if you have an older car or one that is mostly paid off at the outset, the costs of Gap stand-alone insurance may outweigh the benefits. And if you have a high-risk tolerance level combined with low funds, you may want to take the gamble and forego it.

Of course, the decision may be taken out of your hands in certain situations. You may not qualify, or your dealership or region may mandate that you buy Gap insurance for your auto. Ultimately, this type of insurance is worth it for the proper drivers, as it can save consumers thousands of dollars they would have otherwise lost.

While State Farm may not explicitly label its Payoff Protection plan as Gap insurance, the benefits are similar. What distinguishes it from competitors is the company behind it. With State Farm’s solid reputation and high customer satisfaction rates, you can trust that you’ll likely get a return on your investment. It is essential to explore this when considering the cheapest car insurance companies.

State Farm is worth your time if you are in the market for Gap auto insurance. Understanding Gap insurance can be difficult. Armed with the above information, you can now proceed with a much clearer understanding.

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