Gap Insurance in Massachusetts (2025)

If you’re considering financing a new car in Massachusetts, it’s important to understand how gap insurance works.

Gap insurance acts as a safety net to protect you from potential financial gaps in the event of a total loss from accident or theft. This coverage is especially useful for people who lease or finance their cars.

Full-coverage insurance costs $145 per month in Massachusetts. Adding gap coverage typically costs an extra $2 per month. Here are the ins and outs of gap insurance in Massachusetts, its benefits, and why it’s essential for people with leased cars or car loans.

How gap insurance works

Gap insurance — also known as guaranteed auto protection insurance — is a type of insurance coverage that helps protect you from financial loss in the event of a total-loss accident or theft. It covers the “gap” between the vehicle’s actual cash value (ACV) and the amount you still owe on the car loan or lease.

When you purchase a new car or truck, its value begins to depreciate instantly. Most vehicles experience a significant drop in value — often around 20% — within the first year. If you have a standard auto insurance policy, it typically covers the depreciated value of the vehicle. In other words, if your insurer declares your car a total loss, it’ll reimburse you for the current market value of the vehicle as of the time you file a claim.

But if you leased or financed the purchase of your new car with a down payment of less than 20%, the amount left on the loan or lease may be more than the market value of the vehicle in the initial years of ownership. This creates a gap between what your insurance company pays after a total loss and what you still owe on the loan or lease.

What gap insurance covers in Massachusetts

Gap insurance covers the difference between the ACV that your insurance policy pays and the remaining amount you owe on the loan or lease. In the event of a total loss accident or theft, the gap insurance company pays off the remaining balance on your loan or lease, ensuring you don’t have to bear the financial burden.

For example, let’s say you purchased a car for $30,000 and took out a loan to finance it. A year later, the car is in an accident and your insurer declares it a total loss, reimbursing you for its actual cash value of $24,000. But you still owe $28,000 on your car loan.

In this scenario, your standard auto insurance will only pay you $24,000 based on the car’s ACV, leaving you with a $4,000 gap. With gap insurance, the insurance company covers this $4,000 gap, allowing you to pay off the loan completely.

Best gap insurance companies in Massachusetts

If you’re looking for gap insurance in Massachusetts, these are some of the best gap insurance companies.

Liberty Mutual

USAA

Allstate

Gap insurance vs. full coverage

In Massachusetts, full-coverage insurance generally refers to a combination of different types of auto insurance coverage that provide a higher level of protection than the state’s minimum required coverage.

In Massachusetts, the minimum required auto insurance coverage includes:2

• $20,000 per person for bodily injury liability

• $40,000 per accident for bodily injury liability

• $5,000 per accident for property damage liability

• $8,000 per accident for personal injury protection (PIP)

• $20,000 per person and $40,000 per accident for uninsured motorist coverage

Full-coverage insurance includes these mandated coverages, plus comprehensive and collision insurance coverages. Comprehensive insurance pays for damages to your car not related to collisions like theft, vandalism, and weather damages.

Collision insurance pays for your car repairs from collision-related damages, like hitting a pole or another vehicle. But neither of these coverages pay the difference between your auto loan and lease and your car’s actual cash value after a total loss — that’s where gap insurance comes in.

Who needs gap insurance in Massachusetts?

Whether someone with full coverage needs gap insurance depends on their specific circumstances. It’s particularly beneficial for people who:

• Made a small down payment: If you made a down payment of less than 20% on your vehicle, there’s a higher likelihood of the loan amount exceeding the market value, making gap insurance valuable.

• Have a long-term loan or lease: If you financed your vehicle for 60 months or longer, the gap between the loan amount and the vehicle’s value may persist for a significant portion of the loan term, making gap insurance beneficial.

• Lease a vehicle: Lessors often require gap insurance for leased vehicles, as it protects against potential financial gaps in the event of a total loss.

• Purchased a fast-depreciating vehicle: Some vehicles depreciate at a faster rate than average. If you bought a vehicle with a higher depreciation rate, the gap between the loan amount and the vehicle’s value could be significant, making gap insurance a wise choice.

• Rolled over negative equity: If you rolled over negative equity from a previous car loan into your new loan, the loan amount may exceed the vehicle’s value, making gap insurance important for protecting against financial loss.

Considering these factors, it’s important to assess your specific financial situation and the potential gap between the loan/lease amount and the vehicle’s value. If you determine that the gap could pose a financial burden, buying gap insurance can provide additional peace of mind and financial protection.

“Gap coverage is essential for drivers of leased vehicles because of the residual value, but also can provide important financial protection for vehicle owners who have long-term loans,” says Mark Friedlander, director of corporate communications of the Insurance Information Institute.

How to buy gap insurance in Massachusetts 

You can typically purchase gap insurance from car dealerships and insurance companies. The cost of gap insurance varies depending on factors such as the value of the vehicle, the length of the loan or lease, and the insurer. It’s often available as an add-on or endorsement to your existing auto insurance policy.

“While most car dealers offer gap coverage, we strongly recommend consumers only purchase the coverage through their auto insurer versus buying it from the dealer,” says Friedlander. “There is a major cost differential. Don’t let a car dealer talk you into purchasing gap coverage from them.”