Gap Insurance in Michigan (2025)

In the event of total vehicle loss, severe damage, or theft, gap insurance covers the difference between the value of your car and the remaining amount you owe on your car loan.1 It’s smart to invest in gap insurance if you have a car loan or lease your vehicle.2 The national average cost of full coverage in Michigan is $214 per month. Adding gap insurance to your policy typically costs an additional $2 per month.

Though Michigan has the most expensive car insurance rates in the U.S., you shouldn’t try to save money on insurance by skipping this optional coverage type. Comparing car insurance rates from multiple companies can help you find affordable coverage.

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

How gap insurance works

Also sometimes referred to as guaranteed asset protection, guaranteed auto protection, or loan/lease coverage, gap insurance is optional coverage. It pays the difference between your vehicle’s actual cash value (ACV) and your car loan balance if someone steals your car or you total it.

For example, if an auto accident totals your vehicle, your insurer may cover the current worth of your vehicle (minus your insurance deductible) with collision insurance.3 But the ACV of your vehicle may cost less than what you still owe on your auto loan.

Your new car will likely depreciate in value by 20% during the first year you own it, according to the Insurance Information Institute. Since vehicles depreciate rather quickly, gap insurance can provide financial protection if you’ve financed or leased your vehicle. Buying gap insurance helps you avoid making out-of-pocket payments for a total loss or stolen vehicle.

What gap insurance covers in Michigan

Gap insurance can cover the cost difference between the ACV of your vehicle and the remaining auto loan or lease balance. It’s a supplemental coverage that works alongside collision and comprehensive coverage in the event of auto theft or a vehicle-totaling accident. It doesn’t cover partial vehicle damage, routine maintenance, or missed car payments.

Here’s an example to demonstrate how the coverage works. In this scenario, you have $30,000 left on your auto loan, the ACV of your car is $25,000, and your comprehensive coverage deductible is $500.

If someone steals your car, your comprehensive policy payout is $24,500, which is the ACV of your vehicle minus your deductible. You still owe $5,500 on your auto loan. If you have a gap insurance policy, it can cover this remaining balance so you don’t have to deal with a financial loss.

You should know that gap insurance coverage may have maximum claim benefits and loan term limits. Read the terms and conditions of your car insurance policy to understand the reach of your coverage.

Best gap insurance companies in Michigan

Many car insurance companies offer gap insurance, but some don’t. For example, State Farm and GEICO — two of the nation’s largest auto insurers — don’t offer gap insurance. Make sure you check with your current insurer to see whether it provides it.

Here are three of the best car insurance companies offering gap insurance for Michigan drivers.

Auto-Owners

Travelers

Liberty Mutual

Gap insurance vs. full coverage

A full-coverage policy in Michigan generally includes a combination of coverages to keep you protected, including liability, collision, and comprehensive insurance. Michigan requires drivers to carry a minimum amount of bodily injury and property damage liability insurance to cover the costs of the other driver’s medical bills and vehicle damage in the event of an accident.

Collision coverage kicks in to cover your vehicle damages after an accident, and comprehensive insurance pays for repairs caused by vandalism, severe weather, and other qualifying events. Though full-coverage insurance provides a range of protections for Michigan drivers, it doesn’t include gap insurance. But the two optional coverages do work well together.

Not everyone with full-coverage insurance needs gap insurance, but it’s a good idea for drivers financing or leasing a vehicle worth less than their auto loan balance.

Who needs gap insurance in Michigan?

Michigan law doesn’t require gap insurance, but your lender or financial institution might include it as a requirement in your contract. Even if it doesn’t, it’s typically a smart move to consider gap insurance if you’ve financed or leased your vehicle.

You should consider gap insurance if any of the following statements apply to you:

• Your auto loan lender requires it.

• You have a repayment term of 60 months or more.

• You put no or a low down payment (such as 20% or less) on your vehicle.

• You’re currently leasing a vehicle.

• You have a high interest rate on your auto loan.

• You have a luxury or electric vehicle that may depreciate faster than standard vehicles.

• You have negative equity from your previous auto loan rolled into your new one.

“It’s not uncommon for the value of a vehicle to depreciate quickly, especially with new vehicles,” says Zack Fortman, personal lines insurance agent and office manager at Fortman Insurance Services. “When this happens, there could be a gap between the vehicle value and loan amount.”

If the current balance on your auto loan exceeds the actual cash value of your vehicle, you should purchase gap insurance. But you may not need gap insurance if the difference between your auto loan balance and the car’s actual cash value is small or if you can comfortably afford any gaps between the insurance payout and your auto loan.

How to buy gap insurance in Michigan

If you’re buying a new vehicle, the car dealership might offer you gap insurance during the purchase. Though this is convenient, you typically can find more cost-effective options. In Michigan, you can purchase gap insurance from an auto insurance company or your lender. Not all auto insurers offer it, so you should check with your current insurer.

If you get gap insurance through a car insurance company, you can typically add it to your current policy. For example, if you have collision and comprehensive coverage, you can add gap insurance with the same insurance company. Some auto insurers may offer stand-alone gap insurance policies, though this is less common.

Another potential way to get gap insurance in Michigan is through your auto loan lender, which is typically a bank, credit union, or other financial lender. For example, Michigan First Credit Union offers auto loans and gap insurance coverage. To qualify for credit union products, you typically need to become a member and meet certain eligibility requirements.

Gap insurance in Michigan FAQs