Does State Farm Have Gap Insurance?
State Farm doesn’t have gap insurance, but State Farm Bank auto loan customers get automatic Payoff Protection benefits with the same function.
Written by R.E. Fulton
Reviewed by Kathleen Flear
State Farm doesn’t offer gap insurance to auto insurance customers. Instead, owners who finance their vehicle through State Farm Bank have access to a benefit called Payoff Protector® which is similar to gap insurance.
If you financed your vehicle with an auto loan from State Farm, you have Payoff Protector. But if you only have a regular
car insurance
policy with State Farm, you won’t be able to get gap insurance coverage through them. In this article, we’ll go over the benefits of Payoff Protector and the options available to State Farm insurance policyholders who need gap insurance. Does State Farm offer gap insurance?
No, State Farm doesn’t offer gap insurance.
Gap insurance
, also known as Guaranteed Asset Protection, is an insurance product that covers the difference between what your vehicle is actually worth and the amount you owe on your loan if the car is totaled or stolen. It’s different from new car replacement insurance
, which can help you purchase a similar vehicle if yours is totaled shortly after you buy it. Most car insurance companies offer gap insurance, but State Farm, GEICO, and USAA don’t. Gap insurance won’t help you replace your car—it just helps you avoid responsibility for an unpaid loan balance on a totaled car.
How does gap insurance work with State Farm?
State Farm doesn’t offer gap coverage or new car replacement insurance. If you have car insurance coverage through State Farm and your vehicle is totaled or stolen, your loss will only be covered by
collision
or comprehensive insurance
—if you have them. With full coverage—that is, collision and comprehensive coverage—from State Farm, you’ll be able to get a payout for the
actual cash value
of the vehicle if it’s declared a total loss, minus your deductible
and any applicable taxes or fees when you file a claim. The same thing applies to auto thefts. The problem? If you recently purchased your vehicle, you likely owe more on your auto loan than your vehicle was worth when it was totaled or stolen. If you only have full coverage State Farm insurance
without any gap coverage
, you’ll still be responsible for paying the remaining loan balance
, even though you no longer have the car. And if you only carry your state’s minimum required liability insurance
, you’ll be out of luck. On the other hand, if you have a car loan through State Farm Bank, your Payoff Protector benefits will cover the difference between your insurance payout and any outstanding balance on your loan.
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What to do if you have State Farm and need gap insurance
In most cases, gap insurance is considered optional coverage, but it may be a requirement from your lender, especially if you’re
leasing your car
rather than financing. So what should you do if you already have State Farm auto insurance but need to purchase gap coverage
? There are a couple different ways for State Farm customers to get gap insurance. First, many dealerships,
credit unions
, and banks offer gap insurance as an optional add-on when you take out an auto loan through them. As long as you’re purchasing the coverage through your lender, you can get gap insurance from a different auto insurance company than your regular provider. On the other hand, you may want to keep all your types of coverage in one place. If you’re considering buying gap coverage, compare
car insurance quotes
from a few different companies that do offer gap insurance—such as Progressive
, Allstate
, and Nationwide
—to your current premium. If you find an auto insurance policy that includes gap coverage at a lower rate, it may be worth switching insurance providers altogether. Is gap insurance worth it?
In most cases, yes. Gap insurance costs between $20 and $40 per year on top of your regular auto insurance rates, and it could save you thousands of dollars or more, depending on the value of your vehicle when it’s declared a total loss.
Depreciation
for new vehicles can leave you extremely vulnerable in the first year of car ownership. While your collision coverage will pay for some losses, it won’t pay out more than your car’s value—which is what you’ll owe if you total the car early in the loan term. Gap insurance covers the difference at an extremely low average rate, making it one of the most cost-effective coverage options for new vehicle owners. You can cancel your gap insurance once you no longer owe more than your car is worth—and you can
get a refund
when you do. MORE: The best car insurance for bad credit drivers
What is the most gap insurance will pay?
The maximum amount that gap insurance will pay out depends on a lot of factors, from the other auto insurance coverage you carry to the down payment you made on your car.
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