, drivers who lease or finance newer vehicles may want to consider adding this optional coverage to their policy. If your vehicle is totaled or gets stolen and the balance on your loan is greater than the vehicle’s worth, gap insurance will pay the difference so you don’t have to.

If you’re interested in purchasing gap insurance, the three places to inquire about it are the dealership where you got your car, the bank or credit union where you pay your

car loan

or lease, or your current

car insurance

provider. Most of the time, gap insurance rates are the cheapest if you work directly with your insurer.

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The best gap insurance companies in Massachusetts

Several major insurance companies offer gap insurance to drivers in Massachusetts, but prices vary. Big names like

Travelers

offer some of the most competitive rates for gap insurance in the state.

Not all insurance providers have gap insurance as an add-on option. If your current insurer doesn't sell gap coverage but your lease agreement requires you to carry it, you probably need to look into

switching insurance companies

MORE:

How to shop for auto insurance

How does gap insurance work in Massachusetts?

Gap is an acronym for guaranteed asset protection, which is a pretty straightforward definition of how gap insurance works in Massachusetts, and every other state.

When you agree to a years-long financing or leasing agreement but wind up totaling the vehicle or are a victim of

car theft

shortly after entering the contract, there’s a chance you’ll owe more toward the vehicle than its

actual cash value

Instead of having to make up the difference, gap insurance will cover this cost for you—as long as you have

collision coverage

and

comprehensive coverage

. If you’re only carrying the

state minimum liability coverage

, gap insurance won’t be able to help you.

Keep in mind that not every driver needs to add gap insurance to their policy. If your vehicle has been completely paid for or you only have a handful of payments left, gap insurance isn’t necessary.

Even if you opted out of gap insurance when it was offered to you at the dealership, you can often add it to your current insurance policy—you’ll just need to discuss it with your insurer first. Typically, your insurer will require that your vehicle meets the following criteria:

It is less than three years old

There isn’t any pre-existing damage

You are either the first or second owner of the vehicle

The current value and mileage are within the insurer’s pre-set limits

MORE:

New car insurance: What coverage do you need when buying a new car?

What does gap insurance cover?

You’ve probably heard that new vehicles depreciate quickly—so quickly in fact that they can lose 5% of their value just by being driven away from the dealership. According to the

Insurance Information Institute (III)

, brand-new vehicles lose around 20% of their value in the first 12 months of ownership.

Most drivers take longer than one year to pay off 20% of their car loan, which is why gap insurance can be a godsend if your vehicle meets a destructive fate shortly after you agree to finance or lease it—it may even cover your

insurance deductible

after you

file the claim

Let’s take a real-world example. Suppose you’ve taken out a $32,000 car loan and have

full coverage

to protect your investment. Months later, you’re leaving the movie theater late at night and realize your car is no longer where you parked it!

After

reporting the theft

to your insurance company, they deliver the blow—your financed vehicle is worth $29,000 but you still owe almost $31,000 on the loan, leaving you on the hook for a couple grand plus the cost of replacing the car.

If you have gap insurance when tragedy strikes, you don’t have to cover the difference—all you need to do is submit an additional claim along with the insurance settlement for the theft to have the remainder of the loan balance paid out or waived.

MORE:

When your car is totaled and you don’t have gap insurance

Average monthly cost of gap insurance in Massachusetts

It costs Massachusetts drivers an average of $25 to $50 per year to add gap coverage to your existing policy.

On the other hand, purchasing gap insurance through your dealership or lender can cost you a lump sum between $500 and $750. If you want gap insurance, going through your insurance provider is the obvious choice.

MORE:

How to cancel gap insurance and get a refund

Is gap insurance worth it in Massachusetts?

It could be. Let's go over a few instances in which purchasing gap insurance could be a smart move:

You made a small

down payment

on the vehicle—as in less than 20% upfront

The vehicle you’re financing has an above-average depreciation rate (

BMW

is a prime example)

You put an average of 15,000 miles per year on your vehicle

Your loan term is

longer than average

(over 72 months)

Negative equity from a previous car loan has rolled over onto your current financing agreement

If any of these situations apply to you, adding gap coverage through your insurer is a great safeguard that doesn’t come at too high a cost.

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