AAA does offer gap insurance, but only to members who buy or lease a new vehicle through their preferred dealer network

AAA gap insurance is available as an add-on to your auto insurance policy, but the program has a specific requirement: the vehicle must be financed or leased, not paid for in cash. You cannot purchase AAA gap insurance for a used car, and you cannot add it after you've already bought the vehicle—it must be part of the initial purchase or lease agreement. The coverage pays the difference between what your insurance company pays out if your car is totaled and what you still owe on the loan or lease.

AAA gap insurance is not available in all states. Coverage varies by state and by which AAA club you belong to (AAA has regional clubs with different offerings). You'll need to contact your local AAA club directly to find out whether gap insurance is offered in your area and what the cost is, since rates differ by region and by the value of your vehicle.

Key Takeaways

  • AAA gap insurance is only available for new vehicles that are financed or leased, not for used cars or vehicles you own outright.
  • You must add AAA gap insurance at the time of purchase or lease—you cannot add it later if you didn't include it originally.
  • Gap insurance is not offered by AAA in every state, so you need to check with your regional AAA club to see if it's available to you.
  • If AAA gap insurance is not available in your state or you bought a used car, you can purchase gap insurance from your lender, your insurance company, or a third-party provider.
  • Gap insurance costs vary widely depending on the vehicle's value, the loan term, and the provider you choose.

How AAA gap insurance works and what it covers

Gap insurance covers the "gap" between the amount your auto insurance pays when your car is totaled and the amount you still owe on your loan or lease. For example, if you owe $20,000 on a car loan and your car is totaled in an accident, but your insurance company only pays $18,000 (the car's current market value), you would still owe $2,000 to the lender. Gap insurance would pay that $2,000 difference.

AAA gap insurance typically covers vehicles that are financed or leased and are less than a certain age (often five to seven years old, depending on the program). The coverage does not explore to vehicles you own outright, vehicles with cash-down payments only, or vehicles that have already depreciated significantly. AAA gap insurance also does not cover damage from wear and tear, mechanical failure, or anything other than a total loss.

When you can add AAA gap insurance to your policy

The timing for adding AAA gap insurance is strict: you must add it at the time you purchase or lease the vehicle. Most AAA clubs require that you add gap insurance within 30 days of taking ownership or signing the lease, though this window varies by region. If you did not add it at purchase and that window has closed, you cannot add AAA gap insurance after the fact.

To add AAA gap insurance, contact your AAA club directly or speak with your insurance agent. You will need to provide information about the vehicle (VIN, purchase price, loan amount, and loan term). Some AAA clubs allow you to add gap insurance online through your member account, while others require a phone call or in-person visit.

What to do if AAA gap insurance is not available in your state

If your AAA club does not offer gap insurance, or if you did not add it at the time of purchase, you have other options. Your lender (the bank or finance company that holds your car loan) often offers gap insurance directly. This is sometimes called "loan/lease gap coverage" and is often bundled with your loan paperwork at the dealership. Ask your lender whether gap insurance was included in your loan agreement or whether you can add it now.

Your auto insurance company may also offer gap insurance as a separate add-on to your policy, even if AAA does not. Call your insurance agent and ask whether gap coverage is available and what it would cost. Some insurance companies offer it for a small monthly premium; others charge a one-time fee.

If neither your lender nor your insurance company offers gap insurance, you can purchase it from a third-party provider. These companies specialize in gap insurance and can issue a standalone policy. Third-party gap insurance is typically more expensive than lender or insurance-company options, but it may be your only choice if you bought a used car or if you did not add gap insurance at the time of purchase.

The cost of AAA gap insurance and how it compares

AAA gap insurance costs vary by region and by vehicle value. Most AAA clubs charge either a one-time fee (typically $200 to $600) or a small monthly premium added to your auto insurance bill. The exact cost depends on the vehicle's purchase price, the loan amount, the loan term, and your location.

Gap insurance from your lender is often the least expensive option because it is bundled with your loan. Lender gap insurance typically costs $500 to $1,000 as a one-time fee rolled into your monthly payment. Insurance-company gap coverage usually costs $5 to $15 per month. Third-party gap insurance is often the most expensive, ranging from $600 to $1,200 for a policy that lasts the life of your loan.

To compare costs, get quotes from AAA, your lender, your insurance company, and at least one third-party provider. Ask each one what the coverage includes, whether there are any exclusions, and whether the policy can be cancelled if you pay off your loan early (some policies offer a refund if you cancel before the loan is paid off).

Situations where gap insurance does and does not help

Gap insurance is most useful if you are financing a new car with a small down payment and a long loan term. New cars depreciate quickly in the first few years, so the gap between what you owe and what the car is worth can be large. If you put down 20 percent or more, have a short loan term (three years or less), or are buying a used car that has already depreciated, the gap is usually smaller and gap insurance may not be worth the cost.

Gap insurance does not cover accidents where you are at fault and your insurance company denies the claim. It does not cover damage from mechanical failure, wear and tear, or anything other than a total loss. It also does not cover the cost of your deductible—if your insurance deductible is $1,000, you still pay that out of pocket, and gap insurance only covers the difference between the insurance payout and what you owe.

Frequently Asked Questions

Can I add AAA gap insurance after I've already bought the car?

No. AAA gap insurance must be added at the time of purchase or lease, usually within 30 days of taking ownership. Once that window closes, you cannot add AAA gap insurance. However, you may be able to purchase gap insurance from your lender, your insurance company, or a third-party provider at any time.

Does AAA gap insurance cover used cars?

No. AAA gap insurance is only available for new vehicles that are financed or leased. If you bought a used car, you will need to explore gap insurance through your lender, your insurance company, or a third-party provider.

What happens if I pay off my loan early—can I cancel gap insurance and get a refund?

It depends on the provider and the policy. Some lenders and insurance companies offer a refund if you cancel gap insurance before your loan is paid off. Ask your provider about their cancellation and refund policy before you purchase. Third-party gap insurance policies vary widely, so read the fine print.

Is gap insurance worth the cost?

Gap insurance is most valuable if you are financing a new car with a small down payment and a long loan term. If you put down 20 percent or more, have a short loan, or are buying a used car, the gap between what you owe and what the car is worth is usually small, and gap insurance may not be worth the cost. Calculate the gap yourself: take the car's current market value and subtract what you owe on the loan. If that number is small, gap insurance is probably not necessary.

Can I get gap insurance if my car is already totaled?

No. Gap insurance only covers future total losses. You cannot purchase gap insurance after an accident has already happened. If you are currently upside down on a car loan (you owe more than the car is worth), gap insurance will not help with that situation.