Gap Insurance in Colorado (2025)

Gap insurance can help fill in the coverage gap between what you still owe on a financed or leased vehicle and the insurance payout following total vehicle loss due to an accident or theft.1 Without this coverage, you risk draining your savings or having to use credit cards to pay for a loan or lease on an unusable vehicle.

Some major insurance companies don’t offer this coverage. When shopping around for auto insurance quotes, always consider what coverage you need for your vehicle.

Here’s what you need to know about gap insurance in Colorado.

How gap insurance works

Gap insurance is an optional auto insurance coverage that can provide financial protection after a total loss or theft. It can cover the “gap,” or the difference between the current value of your car and your loan or lease balance after you pay the deductible.

To qualify for gap insurance, you’ll need collision and comprehensive coverage — both of which are part of a full-coverage policy for your vehicle.

What gap insurance covers in Colorado

In Colorado, gap insurance pays the remaining amount on your car loan or lease after a total vehicle loss if your insurance settlement amount doesn’t cover your remaining balance.

For example, let’s say your insurer considers your car a total loss after an accident, you have a remaining auto loan balance of $25,000 on your auto loan, and an insurance adjuster determines the fair market value of the car is $20,000.

After you pay your $1,000 deductible, you’re left with a standard insurance payout from your collision insurance of $19,000. Your gap insurance could then cover the remaining $6,000 you owe on your auto loan. Otherwise, you’ll have to pay the remaining balance out of pocket.

Best gap insurance companies in Colorado

To help you find a gap insurance policy, consider the following three reputable car insurance companies that offer affordable coverage in Colorado.

American Family

Nationwide

Travelers

Gap insurance vs. full coverage

Full coverage is a combination of three main auto policies for car buyers: liability insurance, collision insurance, and comprehensive insurance. Depending on your situation, it might make sense to invest in gap insurance in addition to full coverage for your used or new car.

Full-coverage insurance protects you in the event of a valid claim involving theft, accidents, or damages. Gap insurance will reimburse you for the difference between the insurance settlement after a total vehicle loss and your remaining auto loan balance. Having both types of coverage provides the most protection.

Who needs gap insurance in Colorado?

Colorado doesn’t require drivers to buy gap insurance. If you decide to buy it, you should know that Colorado law has a maximum gap agreement fee that an insurance company or dealership can charge gap insurance buyers. The rule states that the gap fee can’t exceed $600 or 4% of the car loan amount, whichever amount is higher.2

While gap insurance is optional by state law and on the federal level, you may want to consider it in the following situations:3

• You put down less than 20% on your vehicle.

• Your auto loan is 60 months or longer.

• You have a lease on your vehicle.

• Your vehicle type depreciates quickly.

• Negative equity from an old car loan transferred to your new loan.

How to buy gap insurance in Colorado

Car dealers and insurance companies sell gap insurance in Colorado. It’s a good idea to shop around and compare gap insurance policies to find an affordable premium that fits your budget and needs.

While it’s possible to buy gap insurance as a stand-alone policy, many insurers will allow you to add it to your current car insurance coverage.

If you buy gap coverage through an auto dealer, you’ll pay more because the cost of gap insurance will roll into your auto loan and include interest payments.