Gap Insurance in Louisiana

Louisiana law doesn’t require gap insurance, but it can cover the difference if you total your car and owe more on your loan than it’s worth.
Written by John Davis
Edited by Sarah Gray
Gap insurance
—also known as guaranteed asset protection—is an optional form of
car insurance
that covers the difference between your car’s actual value and the amount you owe on your auto loan if the vehicle is totaled. 
  • Gap insurance in
    is a
    type of coverage
    that protects you if you total your car and owe more on the loan than the vehicle’s actual cash value. 
  • Louisiana law doesn’t require gap insurance, but your lender may. 
  • Many Louisiana auto insurance providers offer gap coverage as an add-on to full coverage policies. 

How gap insurance works in Louisiana

Gap insurance is an invaluable tool for Louisiana drivers who don’t own their cars outright. If you total your vehicle, gap coverage protects you by paying the difference between what you owe on your
car loan
and your car’s
actual cash value (ACV)
To simplify: if you total your new car but owe your lender more than the car is worth, gap insurance will pay the difference. 
Here’s how it works:
  • When you purchase a car—new or used, but especially new—it begins to lose value the second you leave the dealership. This is called depreciation. New cars lose around 20% of their value in the first year alone. 
  • Your car loan balance will typically be higher than your vehicle’s actual cash value during the first several years after you purchase it. 
  • If you total your vehicle, standard car insurance policies only pay for the vehicle’s actual cash value at the time of the accident—not the car’s value when new. 
  • If the payout from the insurance company is less than what you owe on your auto loan, gap insurance covers the deficit. 
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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

Buying gap insurance in Louisiana

Louisiana car insurance law
doesn’t require drivers to purchase gap insurance. But if you purchase your car with a loan or lease, your lending agency will likely require gap coverage. 
When adding gap coverage to your auto insurance policy, remember to do the following:
  • Consider your car’s projected depreciation and your outstanding loan balance when choosing a gap insurance coverage amount.
  • When determining gap coverage levels, factor in your vehicle’s make and model, depreciation rate, and loan term length to ensure you’re protected if you experience a total loss. 
Your bank, lender, or car dealership may offer you a gap insurance policy when you purchase or lease your new vehicle. However, before you accept, it’s wise to compare options from several insurance providers. 
While it may be tempting—and convenient—to purchase coverage at the dealership,
gap coverage tends to be cheaper
through car insurance companies. In fact, adding gap coverage to your existing policy might even reduce your insurance costs!

Gap insurance companies in Louisiana 

Louisiana drivers can purchase gap insurance through insurance agencies, auto loan lenders, and even dealerships. 
Some of the biggest insurance companies that offer gap insurance to Louisiana drivers include:
  • State Farm
    . When you get an auto loan through State Farm, you get Payoff Protector. Like gap insurance, Payoff Protector covers the difference between the amount you owe on the loan and the actual value of your car. 
  • Progressive
    . Progressive calls its gap insurance loan/lease payoff coverage. This add-on only covers up to 25% of your car’s value toward the difference between what you owe and what the car is worth. 
  • USAA
    . USAA offers a form of gap insurance called total loss protection to active and former military personnel and their families. 
  • Nationwide
    . Nationwide offers a gap insurance policy to cover you if your car is totaled or stolen.
  • Berkshire Hathaway. The
    owner offers gap coverage that tends to be significantly more affordable than a dealership’s coverage. 
There are numerous other companies in Louisiana that offer gap insurance. It’s always wise to compare insurance quotes from a wide variety of companies, including lenders like credit unions before you make a decision. 
Shopping around
and comparing insurance products can help you find the lowest premiums.
Comparing insurance rates
from several companies that offer gap coverage is the best way to ensure you get the lowest price. 
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Louisiana law does not mandate drivers to purchase gap insurance, but auto lenders may require it. Even if your bank or lender doesn’t require it, purchasing gap coverage is a smart decision if you take out a loan to buy a car, have a lease, or own a vehicle that depreciates rapidly.
Gap insurance covers the difference between your car’s actual cash value at the time of an accident and the remaining amount that you owe on a loan. On the other hand, if you total your vehicle within a certain time period or prior to a specific number of miles,
new car replacement coverage
will replace it with a new one of the same make and model—minus your deductible. 
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