Gap Insurance Tax In Florida

Guaranteed Asset Protection (GAP) insurance is not required by law in Florida, but it is a good idea to purchase it if you have a lease or car loan. It is also a requirement for those who lease a vehicle. GAP insurance covers the difference between the value of your car and the amount you still owe on your loan. It is not subject to Florida's sales tax.

When is gap insurance useful?

Gap insurance is useful in several scenarios. Firstly, if you've financed a new vehicle, gap insurance can be valuable as it covers the difference between the amount you owe on your car loan and the car's actual cash value. This is especially relevant if your car is totaled or stolen, as standard car insurance will only pay up to the current value, which may be less than the outstanding loan amount.

Secondly, gap insurance is useful if you've put little to no money down on a car purchase and have chosen a long payoff period. In this case, you may owe more than the car's current value, and gap insurance can help minimize financial losses. It's also useful if you've made a down payment of less than 20% or if you're financing the car for more than five years.

Additionally, gap insurance is often required for leased vehicles and can provide peace of mind in case something happens to your car. It's also useful if you have a car that depreciates faster than average or if you've rolled over negative equity from an old car loan into a new one.

In Florida, gap insurance is not required by law, but it may be needed if it's a condition of a lease or auto loan. It can be purchased from a lending company, dealership, or auto insurance company, with the latter often offering the best rates.

Who needs gap insurance?

Gap insurance is not required by Florida law, but it is an optional form of auto insurance that can be valuable in certain situations. Gap insurance is designed to protect automobile owners if their car is totaled or stolen and they owe more than the car is worth. Here are some scenarios in which you may need gap insurance:

• You have a lease or loan agreement: If you are leasing or financing a vehicle, your lender may require you to purchase gap insurance, especially if you have a lease or loan agreement. Gap insurance can protect you financially and provide peace of mind in case something happens to your car.
• You have a small down payment: If you made a small down payment on your car, such as less than 20%, you may owe more than the car is worth. Gap insurance can help cover the difference between the amount you owe and the car's value.
• You have a long finance period: If you are paying off your car loan in more than 60 months (five years), you may benefit from gap insurance. This is because the longer the finance period, the more likely it is that you will owe more than the car's value.
• You purchased a vehicle that depreciates quickly: Some vehicles, such as luxury sedans or SUVs, may depreciate and lose value at a faster rate. In this case, gap insurance can be valuable as it covers the difference between the depreciated value of the car and the loan amount owed.
• You rolled over a previous car loan: If you rolled over negative equity from an old car loan into a new loan, you may need gap insurance to protect against potential financial losses if the vehicle is declared a total loss.

It's important to note that gap insurance is not necessary if you are not financing or leasing your car, or if you have made a large down payment and are paying off your loan in a short period. Additionally, gap insurance is typically only needed for the first few years of the loan, until the remainder of your loan drops below the value of the vehicle.

How much does it cost?

The cost of gap insurance in Florida depends on various factors, including the value of your car, its make and model, your location, and your age. According to a 2023 rate analysis by Insurance.com, the average gap insurance rate in the state is $2,923 per year. However, this can vary significantly depending on your circumstances. For example, a 20-year-old driver in Florida can expect to pay about $6,284 per year for gap insurance, while a 30-year-old driver would pay closer to $3,134 per year for the same coverage.

The cost of gap insurance also depends on the insurance company you choose. Geico, for instance, offers gap insurance at about $1,684 per year on average, making it the cheapest option in the state. State Farm and Travelers are also among the more affordable options. On the other hand, some companies, like Progressive, will only pay up to 25% of your vehicle's value, which can affect how much coverage you get for your money.

If you buy gap insurance as an endorsement to your auto insurance policy, it may only cost you about $5 or $20 per month, or $60 per year. However, if you buy a gap waiver from a dealership, it will likely cost a few hundred dollars.

It's important to note that gap insurance is not required by Florida law, but it may be required by your lender or leasing company if you have an auto loan or a lease. Additionally, it's a good idea to buy gap insurance if you've financed a new vehicle to protect yourself financially in case your car is totaled or stolen.

Where can you buy it?

In Florida, you can buy gap insurance from your auto insurance provider, or you can purchase a stand-alone gap insurance policy from your car dealer or lender.

It is recommended that you first ask your current insurer about adding gap insurance to your policy, as this is typically the cheapest way to purchase coverage. The cost of gap insurance from your insurer may be as low as $5 per month, whereas a gap waiver from a dealership will often be at least a few hundred dollars.

Not all car insurance companies offer third-party gap insurance, but most of the top Florida insurers do offer gap policies. Some of the best car insurance companies offering gap coverage in Florida include:

• Allstate: Allstate offers gap insurance to policyholders who are the original owners or leaseholders of a new vehicle.
• Liberty Mutual: To get gap coverage from Liberty Mutual, you must be the vehicle’s first owner and purchase the coverage at the same time as your vehicle.
• Progressive: Once added to your policy, Progressive’s Gap insurance does not expire as long as your vehicle is insured with Progressive.
• Travelers: You must be the original owner and purchase your vehicle from a dealership to be eligible for gap coverage from Travelers.
• State Farm: Although it does not offer traditional gap insurance, State Farm offers a similar program known as Payoff Protector for loans originated by State Farm Bank.

How do you get it?

Gap insurance is an optional form of auto insurance in Florida, but it may be required by your lender if you take out an auto loan. It's designed to protect automobile owners if their car is stolen or declared a total loss.

You can purchase gap insurance from most auto insurance companies, or your lender may offer it. It's recommended that you buy gap insurance when you take out a loan or buy a car, so you're covered from the start.

• Allstate
• Liberty Mutual
• Progressive
• Travelers
• State Farm
• Geico

The cost of gap insurance in Florida depends on factors like the value of your car, the car insurance company you choose, your location, and your age. The Insurance Information Institute estimates that adding gap insurance to a policy costs $20 a year. However, the average gap insurance rate in Florida is $2,923 per year, according to a rate analysis by Insurance.com.

Frequently asked questions