Gap Insurance in Colorado (2025)
Gap insurance in Colorado can help if you total your financed or leased vehicle.
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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.
Quick Facts
Gap insurance is an optional car insurance policy that you can buy through a car dealership or auto insurance company as a stand-alone or add-on policy.
Though Colorado doesn’t require gap coverage, it’s a good idea if you want extra financial protection for a leased or financed vehicle.
Per Colorado law, insurance companies or dealerships can’t charge gap insurance buyers a gap fee exceeding $600 or 4% of the car loan amount, whichever is higher.2
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.
Keep in Mind
Gap insurance might not cover excess mileage charges, late fees, or additional charges related to your loan. It also won’t pay for extended warranties or property damage or injuries after an accident.
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
Data scientists at Insurify analyzed more than 40 million real-time auto insurance rates from our partner providers across the United States to compile the car insurance quotes, statistics, and data visualizations displayed on this page.
The car insurance data includes coverage analysis and details on drivers’ vehicles, driving records, and demographic information. Quotes for Allstate, Farmers, GEICO, State Farm, and USAA are estimates based on Quadrant Information Services’ database of auto insurance rates.
With these insights, Insurify is able to offer drivers insight into how companies price their car insurance premiums. The data included on this page represent averages across driver ages, genders, credit scores, and driver profiles for Colorado drivers.
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.
Good to Know
You don’t need gap insurance if you don’t have a loan on your vehicle. It’s a special type of coverage for people financing or leasing their car. Your lender or creditor may require you to purchase it for the duration of your lease.
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.
Gap insurance in Colorado FAQs
The following general information can help answer your remaining questions about gap insurance in Colorado.
Does Colorado require gap insurance?
No. Colorado doesn’t require gap insurance. But your lender may require it, so it’s a good idea to check your finance agreement. Even if you don’t have to buy it, you should consider adding it to your policy for extra protection.
How does gap insurance work in Colorado?
If someone steals your car, SUV, or truck — or you total it in an accident — gap coverage can pay the financial gap between what you owe on your loan or lease and the insurance settlement from your collision or comprehensive coverage.
Gap coverage works as asset protection for your vehicle. You can buy gap coverage as an optional benefit from your car dealer or insurance company.
What exactly does gap insurance cover?
Gap insurance covers the difference between your remaining loan or lease balance and the total amount your insurer pays out for your total vehicle loss. It can come in handy after a serious covered incident, like an accident that totals your car or vehicle theft.
Will gap insurance pay off your auto loan?
If you total your car or someone steals it, gap insurance will pay the remaining balance on your auto loan if it’s higher than the vehicle’s value. But gap insurance won’t help you with a loan to buy a new car.
Is gap insurance worth it?
Gap insurance may be worthwhile if you have a loan or lease on your vehicle. This is particularly true if you have a small down payment, a long-term loan, or drive a vehicle that depreciates quickly. An insurance agent can help you decide whether gap insurance makes sense for your needs.
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