Find Your Perfect Policy: 866-843-5386

Last updated: July 11, 2023

Gap Insurance in Arizona

Although the state doesn’t require gap insurance, your loaner or lessor probably does.

Twitter brand
Facebook brand
Linkedin brand
Reddit brand
Envelop icon

What happens if you total your leased vehicle and still own your lessor money? What if you purchased your car through an auto loan, aren’t finished paying it off and the vehicle is stolen? That’s where gap insurance, short for guaranteed asset protection, comes in.

Although technically not a type of insurance, gap coverage is available from insurance companies, car dealerships and manufacturers and other financial institutions like lenders that can pay the remaining loan balance or lease amount for a car you can no longer drive. But while the state of Arizona doesn’t require gap insurance, your loan provider or lessor probably does. Here’s what you need to know about gap insurance in the Grand Canyon State.

What Is Gap Insurance Coverage?

Gap insurance applies only after your car is totaled or stolen. While technically not insurance, it covers the gap between your car’s actual cash value (ACV) and the amount you still owe on your auto loan or auto lease.

What It Covers

  • Theft of entire vehicle
  • An accident that totaled a vehicle, meaning the repairs cost more than the vehicle’s salvage value.1

What It Doesn’t Cover

  • Bodily injuries and other medical costs
  • Collision or comprehensive deductible, typically
  • Funeral costs
  • Lost wages
  • Missed car loan payments or late fees
  • Total losses from mechanical issues, such as engine failures

How It Works

Just how does gap insurance work in practice? Keep reading for an example.


Imagine you’ve purchased a new car using an auto loan. The car is worth $40,000, and you put down $4,000, meaning you’re still on the hook for $36,000 plus interest. If you total the car and still owe $15,000 on the loan, you would pay your collision deductible (only around $500) and then your gap insurance would cover the remaining $14,500 left on your auto loan. Without gap insurance, though, you’d be responsible for paying the full amount out of pocket.


Gap insurance won’t pay to replace your car. For that, you’d need new car replacement coverage.

The Cost of Gap Insurance in Arizona

So, how much does gap insurance cost in Arizona? That depends on a number of factors.

By Vendor

The cheapest way to purchase gap insurance is as an add-on to a full-coverage car insurance policy. However, if you want it on its own, we recommend buying it from an insurance company, not a manufacturer, dealership or financial institution as those avenues will be much more costly.

Type of gap insurance Average annual cost
Add-on to existing full-coverage policy $25
Standalone from an insurance company $250
Manufacturer $450
Stand-alone from a dealership/financial institution $750
Total insurance for leased vehicles $3,012

By Company

Because a number of criteria affect the cost of car insurance, the cheapest provider for you may not be the same for someone else. In other words, take the average prices below with a grain of salt. You’d need to request a quote from the insurer to find out your specific cost.

Company Average annual cost of gap insurance in Arizona
Auto-Owners $1,275
Clearcover $1,656
CSAA $2,455
Dairyland $3,936
Farmers $3,532
Freedom National $2,400
Hallmark $4,692
Hartford Fire Insurance $1,591
Infinity $3,384
Kemper $3,144
Liberty Mutual $3,432
Mercury $2,184
Midvale Home & Auto $2,628
Motion Auto $1,980
Nationwide $2,112
Progressive $1,799
Travelers $1,588
Trumbull Insurance $1,742

By City

Where you live has a big impact on your average car insurance costs. For example, Phoenix has the highest costs in the state, which might have something to do with its population of 1.6 million people, making it the fifth-most populous city proper in the United States.2 With more people and more cars on the road, accidents and other issues like car theft are more likely, so insurers charge more.

City in Arizona Average annual cost of gap insurance
Avondale $2,094
Benson $1,885
Douglas $1,594
Mesa $1,999
Nogales $1,670
Phoenix $2,420
Sedona $1,734
South Tucson $1,987
Tempe $2,007
Tucson $1,988
Willcox $1,558

By Age

In general, car insurance is the cheapest for someone in their 40s and most expensive for young drivers with little driving experience.

Age Average annual cost of gap insurance in Arizona
20 $4,367
30 $2,115
40 $1,933
70 $1,919

Gap Insurance Laws in Arizona

Arizona requires only liability coverage, not gap insurance.3 Arizona Legislature House Bill 2674 explicitly says that gap insurance is not a type of insurance and is, therefore, not required by the state.4 That said, you’ll probably have to buy it anyway if you loan or lease your car due to the loan or lease company’s requirements.

How Much Gap Insurance Do You Need?

The amount of gap insurance you get should be equal to your car’s price at the time of purchase, such as what you paid for it. Unless you have a classic car, which appreciates in value, regular cars lose value as soon as you drive them off the lot.

If your car’s ACV is less than the cost of repairs, your insurance company will declare it a total loss, and you’ll be left financially responsible for the remaining amount on your loan or lease. By having your car’s purchase price covered through gap insurance, you ensure you’ll be responsible for the deductible only and not the full balance.

Is Gap Insurance Worth It?

Although gap insurance is a smart product to add to your auto insurance policy, it doesn’t make sense for all drivers. So, who is gap insurance best for?

Who Should Buy Gap Insurance

  • Someone who owes more on their car than it’s worth, meaning they are “underwater” or have negative equity on their car loan

  • A person who put down less than 20 percent when they financed their car

  • A policyholder who financed their vehicle with an auto loan of 60 months or longer

  • Someone who leased their vehicle

  • An owner of a vehicle that depreciates faster than average, such as a luxury car like a BMW


What is your car’s ACV? Find out by checking its value on Kelley Blue Book,5 Edmunds,6 or J.D. Power.7 If your loan balance is more than your car’s ACV, you are underwater on your loan and should purchase gap insurance.

Who Should Not Buy Gap Insurance

  • Someone who owns their car outright

  • A person who put less than 20 percent down on their lease

  • Someone paying off their car in less than five years

  • An owner of a car that holds its value over time, like a classic car

How to Buy Gap Insurance

The process of buying gap insurance can look a little different than getting car insurance, as you have more vendors to choose from.

When to Get Gap Insurance

It’s best to get gap insurance when you purchase your car and its insurance policy initially. That way, you can get coverage as soon as you drive your car off the lot as an accident can occur at any time.


We recommend buying gap insurance as an add-on to your existing auto insurance policy if your provider has it as an option. If not, you can purchase it from your car’s manufacturer. We don’t recommend buying it from your car dealership or loan provider, as their rates tend to be much higher.

Cheapest and Best Gap Insurance Companies in Arizona

Some of the best and cheapest companies for gap insurance in Arizona include Auto-Owners, Travelers and Hartford Fire Insurance. Learn more about Travelers’ pricing.


With new car prices as high as they are, most people aren’t buying their cars outright but rather using loans or leases. If that’s the case for you, gap insurance is most certainly in your best interest, even in the state of Arizona. Learn more in our frequently asked questions below.

Frequently Asked Questions

What are the cons of gap insurance?

The cons of gap insurance include the following.

  • It is expensive if you buy it from a dealership or a third-party financial institution like an auto loan provider.
  • It makes buying a new car more costly.
  • You can’t buy it for a used car.
  • Not all car insurance companies offer it.

How much will I get back from gap insurance?

You will get back the remainder of your loan or lease, minus your deductible, from your gap insurance.

Does gap insurance affect your credit?

No, gap insurance does not affect your credit unless you have an unpaid balance that was sent to a collections agency. The debt collector will report this to the three major credit-reporting bureaus ― Experian, TransUnion and Equifax ― which will affect your credit score.

Does canceling gap insurance lower your car payment?

Yes, canceling gap insurance will lower your car payment, whether your gap insurance is through your insurance provider, lessor, dealer or manufacturer.


  1. Total Loss Threshold By State. Appraisal Engine. (2015, Mar 4).

  2. Population Estimate, Phoenix City, Arizona. United States Census. (2022, Jul 1).

  3. Vehicle Insurance Information. ADOT Motor Vehicle Division. (2023).

  4. State of Arizona House Bill 2674. State of Arizona House of Representatives. (2019).

  5. Car Values. Kelley Blue Book. (2023).

  6. How much is my car worth: Instant used car value and trade in value. Edmunds. (2023).

  7. Get New Car Prices and Used Car Values. J.D. Power. (2023).