Is Gap Insurance Required in Florida?

Guaranteed asset protection — also known as gap insurance — is an optional car insurance coverage type sold by insurance companies, car dealerships and other financial institutions in Florida. By purchasing gap insurance, Florida drivers can receive coverage for the leftover amount on their auto loan if their car is totaled or stolen while it is worth less than their outstanding loan balance.

See below for more information about gap insurance in Florida, including when you may need it and what protections exist for shoppers under state law.

On This Page

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  What Is Florida Gap Insurance?

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  Is Gap Insurance Required in Florida?

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  How Does Gap Insurance Work in Florida?

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  What Does Florida Gap Insurance Cover?

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  How Much Does Gap Insurance Cost in Florida?

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  Companies That Offer Gap Insurance in Florida

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  How To Get Gap Insurance in Florida

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  FAQs

What Is Florida Gap Insurance?

Gap coverage is a type of car insurance that can provide a financial safety net for drivers in Florida in case they get into a car accident while their vehicle is worth less than the amount they still owe on their auto loan. Coverage may be available as an add-on to your auto insurance policy or through a separate agreement known as a gap waiver.

Is Gap Insurance Required in Florida?

Florida gap insurance is not required by law, and a lender cannot force you to get gap insurance as a condition for your loan.^[1] Before you can qualify for gap coverage from an insurer, you may need to purchase a car insurance policy that includes comprehensive and collision coverage — which is often already a requirement if you want to take out an auto loan.^[2]

While not everyone needs gap insurance coverage, you should consider obtaining it if any of the following apply to you:^[3]

• Your down payment was less than 20% of the price of the car
• Your loan period will last five years or longer
• You have a lease
• The car you purchased depreciates faster than the average vehicle
• You rolled over negative equity from a previous car loan into your new loan

How Does Gap Insurance Work in Florida?

After a total loss, gap insurance pays out the difference between your outstanding loan balance and the actual cash value (ACV) of your car. ACV refers to your vehicle’s depreciated value when considering factors like age or wear and tear. If your car is stolen or damaged beyond repair, your physical damage insurance will generally reimburse you at the car’s actual cash value.

Since you have to pay interest on your loan and vehicles tend to depreciate quickly — usually losing 20% of their value within a year of purchase — it’s possible for the ACV of your car to dip below your remaining loan balance, in which case your gap insurance can make up the difference in the event of a collision or theft.^[3]

For example, suppose your car is worth $30,000 and you still owe $32,000 to your lender when you get into a car accident that totals your vehicle. In this case, your collision insurance would pay out the car’s $30,000 ACV — minus your deductible — and your gap insurance would pay out $2,000, which you could use to pay off the rest of your loan.

Florida Gap Insurance Laws

Gap products are regulated in various ways by the Florida state government. For example, gap insurance providers must offer a free-look period lasting at least 30 days, during which a policyholder can cancel their coverage at any time and receive a full refund. Even after the free-look period, you may be able to cancel your policy and get a prorated refund — as long as you haven’t received a payout and the contract doesn’t include a no-refunds clause.^[1]

That said, your gap insurance carrier may be able to charge you an administrative fee of up to $75 when processing your refund.^[1]

Is Gap Insurance Taxable in Florida?

Gap insurance coverage is not subject to Florida’s sales tax, according to the Florida Department of Revenue. A Florida court has ruled that fees that are itemized separately from the main cost of a service and are optional for the buyer — which applies to gap insurance premiums — do not constitute part of the service’s sales price and therefore are not taxable.^[4]

Are There Limits on Gap Insurance in Florida?

While gap insurance generally pays out the difference between your remaining loan balance and the value of your car, coverage limits may apply — especially if you obtain guaranteed asset protection from an institution other than an insurance company. For example, Suncoast Credit Union offers gap coverage for loans of up to $125,000 with a maximum benefit of $50,000 after a covered loss.^[5]

What Does Florida Gap Insurance Cover?

Gap insurance works in conjunction with your collision and comprehensive coverage, meaning it may step in after a loss covered by either of those two policies.^[6] For example, your gap insurance policy can help you pay off your auto loan if your car is totaled in an accident, it is destroyed by a natural disaster or the police are unable to recover it after it is stolen.

However, you should note that gap insurance only steps in for total losses. As a result, your gap insurance company won’t help you pay off your loan after an accident if your car can be repaired for less than it is worth. Also, gap insurance differs from new car replacement insurance in that it won’t cover the cost of buying a new car after your previous vehicle is totaled.

Instead, gap insurance allows you to take out a loan for a new vehicle without having to worry about paying off the loan for your previous car at the same time.

How Much Does Gap Insurance Cost in Florida?

On average, it costs about $20 per year to add gap coverage to your car insurance policy.^[3] However, the price can be much higher if you obtain coverage from a company other than your insurer. For example, Suncoast Credit Union’s guaranteed asset protection product has a starting rate of $520 — which comes out to nearly $75 per year across the life of an 84-month loan.^[5]

Companies That Offer Gap Insurance in Florida

Examples of major car insurance companies that operate in Florida and sell gap insurance include the following:

• Allstate
• American Family
• The Hartford
• Liberty Mutual
• Nationwide
• Travelers

Gap coverage is also available through other financial institutions, such as dealerships and banks. These institutions often offer coverage in the form of a gap waiver — a contract that waives your outstanding loan balance if your car is totaled or stolen.^[7] Though they charge more than insurers, lenders and dealers may provide extra gap insurance benefits, such as coverage for part or all of your comprehensive or collision insurance deductible.^[5]

How To Get Gap Insurance in Florida

When shopping for gap insurance, collect quotes from around three to five separate insurance providers so you can compare rates to find the best and most affordable coverage. Gap insurance companies will need to see information like your date of birth, the make and model of your vehicle, how old your car is, your driving record and more to generate a quote.

While it may be tedious to contact multiple insurance carriers individually, you can streamline the process by taking advantage of SmartFinancial’s online insurance marketplace. Simply fill out a brief questionnaire, and we’ll get you in touch with insurance agents who can help you compare high-quality auto insurance policies. Begin comparing auto insurance quotes for free today!