—or guaranteed asset protection insurance—covers the difference between the actual cash value of your vehicle and the amount you owe on the loan if your car is totaled.

Gap insurance in Colorado is an optional
type of coverage
that helps protect against financial loss if your car is declared a total loss and your payout from your
car insurance
doesn’t cover the loan or lease balance.
Colorado law prohibits the cost of gap insurance from exceeding 5% of the vehicle loan amount.
In Colorado, many auto insurance providers offer gap insurance coverage—often as an addition to your full-coverage policy.

How gap insurance works in Colorado

In the event of a total loss or theft, gap insurance can help save you from paying thousands out of pocket. It covers the difference between the

actual cash value (ACV)

insurance payout and the balance owed on your loan.

Let’s look at why gap insurance is important:

Once you sign on the dotted line for a new car, its value begins depreciating immediately—usually by about 20% by the end of the first year

Your loan balance usually is greater than the vehicle’s cash value during the first few years after purchasing your car

If your vehicle is totaled in an accident, car insurance policies use the actual cash value of the car to determine how much they pay when you file your claim

Since an insurance reimbursement can fall short of what is left to pay off on your car loan, gap coverage helps protect you by paying the difference

When do you need gap insurance?

You need gap insurance if the coverage limits of your standard auto insurance policy fall short of the vehicle’s total value.

Gap insurance is usually a good idea if you:

Lease your vehicle

Finance your car for an extended period (five years or more)

Make a low down payment on your vehicle (less than 20%)

Drive a highly customized vehicle or a specific make or model that depreciates quickly

Rolled over negative equity from a previous vehicle into your current loan

Gap insurance in Colorado can’t cost more than 5% of your loan amount

As per state law, gap insurance policies in Colorado cannot cost more than 5% of your loan amount.

If you’re considering buying gap insurance, you’ll want to think about:

How much is left on your loan balance

Your vehicle’s make and model, rate of depreciation, and loan term

Your dealership or lender probably has an insurance policy you can get when you finance or lease the vehicle, but it’s better to shop around for gap insurance to make sure you don’t end up overpaying.

Sure, buying from a dealer can be convenient, but the cost will be rolled into your car loan and can cost you hundreds of extra dollars over the life of your loan. In contrast, gap insurance from your insurance company is generally about $50 per year.

Learn more:

Should I get gap insurance from a dealer or insurance company?

Gap insurance companies in Colorado

There are two main places to find gap insurance in Colorado: car insurance companies and auto loan lenders, such as credit unions.

Let’s look at some companies that offer gap insurance to Colorado policyholders:

Allstate

: They suggest adding gap insurance if you have a small down payment, a long loan term, or a leased vehicle.

Esurance

: They’ll pay off the remaining balance minus a deductible you’ll cover, which is pretty standard.

Liberty Mutual

: They carry standard gap insurance, which includes a deductible on your end before the remaining loan balance is paid off.

Nationwide

: Nationwide gap insurance is generally cheaper than getting the option from your dealership.

Progressive

: Progressive’s option is called loan/lease payoff coverage—however, it only covers up to 25% of your vehicle’s value when paying off the difference.

Travelers

: They offer Loan/Lease Gap Insurance. They’ll cover about 5% of the car's collision and comprehensive coverage, but you’ll have to pay a deductible.

Since plenty of insurers carry gap insurance, you want to check insurance rates across companies, your lender, and the dealership so you have a better idea of what the best deal will be for you.

Remember: Comparison shopping will help you find the best rates.

Compare insurance quotes

from several gap insurance providers so you don’t overpay for coverage.

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FAQs

Do you need gap insurance in Colorado?

Gap insurance is not required by Colorado law and your auto lender can’t force you to get it. That said, it's worth getting if you only put down a small amount on a new car, have a substantial auto loan, or drive a make or model that depreciates quickly.

What’s the difference between gap insurance and new car replacement coverage?

Gap insurance covers the difference between what your vehicle is worth (how much cash you could sell it for) and how much you still have to pay back on the loan.

New vehicle replacement insurance, on the other hand, helps you get a new ride. It will cover the cost of the same make and model as your totaled car, though you’ll pay a deductible.

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