Do I need gap insurance on a used car?

Gap insurance is typically recommended for new vehicles, but it's often possible to purchase for used cars as well. Gap insurance can pay the difference between what you owe on your vehicle and the vehicle's actual cash value (ACV), so you aren't stuck paying the loan on a totaled or stolen vehicle. Without gap insurance, you may be responsible for paying that difference out of pocket.

What is gap insurance?

Some drivers who finance or lease their vehicle owe more than what the car is worth, which can be a problem if the car is totaled or stolen. Insurance can help out if you have comprehensive and collision coverage, but only up to the amount of the car's depreciated ACV. Without gap insurance, you'd be required to pay the difference between your car's ACV and the outstanding loan balance.

Gap insurance coverage can be purchased as an add-on to your existing car insurance policy. It's not a requirement in any state but having gap insurance may provide you with extra financial security if something happens to your vehicle.

Vehicles lose their value more quickly than you may expect — most cars depreciate by about 20% in their first year on the road, according to the Insurance Information Institute.

Can you get gap insurance on a used car?

Gap insurance is most often recommended for new cars, as they depreciate the quickest, but you can typically buy gap coverage for used cars too. Note that some insurers will only sell gap insurance on used cars if they're less than three years old. Gap insurance on a used vehicle can cost very little, so it can provide peace of mind if you owe more on your car than what it's worth.