Most Financed Drivers Skip Gap Insurance — and Don't Know What They'd Owe
Car loans are getting bigger and longer. Nearly half of drivers without gap insurance who finance or lease their vehicle either don't know they could still owe money after a total loss or incorrectly believe they wouldn't.
According to Edmunds, the average amount financed for a new vehicle reached a record $44,156 in Q2 2026, while nearly 1 in 4 financed new vehicles had loan terms of 84 months or longer. At the same time, New York Fed data shows total U.S. auto loan balances reached $1.71 trillion.
As drivers finance more for longer, understanding what happens to the remaining loan balance after a total loss is becoming increasingly important. A new Liberty Mutual survey of more than 1,000 U.S. drivers, including 428 who currently lease or finance their vehicle, found a wide and largely unaddressed gap between what drivers think happens financially after a total loss and what standard auto insurance actually covers. That gap has a name — gap insurance — but most eligible drivers don't carry it.
Key Findings
- While 36% of surveyed consumers are currently financing or leasing their vehicle, only 22% of those consumers carry gap insurance.
- Half of drivers without gap insurance (50%) expect their auto policy to cover their remaining loan balance anyway — coverage that, without gap insurance, typically isn't there.
- Gap insurance is the least-adopted optional coverage, trailing roadside assistance (55%), accident forgiveness (50%) and rental reimbursement (58%) among drivers who add any optional coverage.
- Nearly half of drivers without gap insurance (47%) incorrectly believe they would not owe money, or aren't sure, after their standard insurance pays out on a totaled, financed vehicle.
- Adoption barely moves with loan length. Drivers financing a vehicle for 5+ years — who carry the most exposure — are only modestly more likely to have gap insurance (32%) than drivers with shorter, lower-risk loans (21%).
Get a quote for gap insurance in under 10 minutes to see how much you could save when you only pay for what you need.
The math behind "the gap"
Here's the scenario Liberty Mutual asked drivers to picture: “Imagine that after an accident your vehicle was determined to be a total loss. You still owe $15,000 on your loan for it, but its market value is only $10,000. This leaves $5,000 that is still owed to the financing/lease company. Based on the terms of your current auto insurance policy, would you expect your auto insurance company to cover the remaining $5,000?”
This is exactly the situation gap insurance is built for: it covers the difference between a vehicle's insured value and the remaining loan or lease balance. Without it, that $5,000 is the driver's responsibility.
When Liberty Mutual asked drivers directly whether they'd expect their current insurance to cover that $5,000, the answers split sharply by coverage status:
Would expect insurer to cover the gap | Would not | Don't know | |
|---|---|---|---|
| Drivers with gap insurance | 65% | 18% | 18% |
| Drivers without gap insurance | 50% | 28% | 22% |
Nearly half of uninsured drivers expect coverage that, by definition, they didn't buy. Combined with the 47% who don't realize they could owe money at all, that points to a large group of financed drivers who could be blindsided by a bill in the middle of an already stressful situation.
What this means if you finance or lease your vehicle
Owing money after a total loss is possible even when you did nothing wrong. It's a function of how vehicle depreciation and loan balances interact, not fault or driving record.
Standard auto insurance pays out a vehicle's market value, not your loan balance. If those two numbers don't match — which is common in the first few years of a loan or with longer loan terms — gap insurance is what covers the difference.
Longer loans and larger, newer, or fast-depreciating vehicles carry more of this risk, so it's worth a second look at gap insurance even if you passed on it when you first got your loan or lease.
It's worth checking, not assuming. Whether you already have gap insurance, dropped it, or have never looked into it, confirming what your specific policy and loan terms would mean for a total loss is the only way to know where you stand.
"After a total loss, the last thing anyone needs is a surprise bill on top of losing their car," says Michael Grove, Senior Vice President of Auto Product State Management for Liberty Mutual. "We see this gap show up more often than people expect, especially for drivers who financed for longer or put less money down. It only takes a few minutes to find out where you stand, and that's time well spent before something happens, not after."
“After a total loss, the last thing anyone needs is a surprise bill on top of losing their car. . It only takes a few minutes to find out where you stand, and that's time well spent before something happens, not after.”
See where you stand: try Liberty Mutual's free total loss calculator.
Gap insurance doesn't increase much with longer loans
The survey found the drivers carrying the most financial risk aren't necessarily the ones with the most protection.
Longer auto loans can leave drivers owing more than their car is worth and for a longer period of time, which can make gap insurance more useful. But our survey found that drivers with longer loans are only slightly more likely to have gap coverage.
Loan/lease term | Has gap insurance |
|---|---|
| 36 months or less | 21% |
| 37-48 months | 14% |
| 49-60 months | 24% |
| More than 60 months | 32% |
Only 32% of drivers with loans longer than 60 months have gap insurance, compared with 21% of drivers with terms of 36 months or less.
Vehicle age tells a similar story. Drivers with newer cars are more likely to have gap insurance, while coverage becomes less common as vehicles get older.
Vehicle age | Has gap insurance |
|---|---|
| 0-3 years | 36% |
| 4-6 years | 31% |
| 7-9 years | 31% |
| 10+ years | 19% |
Vehicle prices show adoption is highest among luxury vehicles. Gap insurance adoption is highest among luxury vehicles (47%), while budget (30%) and mid-range (30%) vehicles trail at about the same rate.
Why drivers skip gap insurance
Liberty Mutual's September 2026 survey also asked drivers without gap insurance why they didn't add it. The most common reasons were practical, not about access alone:
- My car's market value is higher than what I owe on it — 25%
- It's too expensive to add to my policy — 24%
- It wasn't offered or suggested by my carrier or agent at the time of purchase — 22%
- I don't think I need it — 19%
- I don't understand it well enough — 18%
- I already have similar protection elsewhere — 17%
More than 1 in 5 drivers without gap insurance say it was never offered or suggested to them at purchase, and nearly 1 in 5 say they don't understand it well enough to know if they need it. This is a sign that the coverage gap is as much about access and education as it is about choice.
Familiarity beats experience as a predictor of adoption
Intuitively, you might expect drivers who've already been through a total loss to be the most likely to carry gap insurance afterward. The survey found something more surprising: prior total-loss experience barely moved the needle (24% adoption among drivers who'd experienced a total loss vs. 22% among those who hadn't).
What did move the needle was simply understanding the coverage:
Familiarity with gap insurance | Has gap insurance |
|---|---|
| Very familiar | 36% |
| Somewhat familiar | 24% |
| Not familiar | 4% |
Drivers who've lived through a total loss are more familiar with gap insurance overall (86% familiar vs. 77% of all financed drivers), but familiarity is doing the real work of driving adoption, not the experience itself. That's a signal that clear, plain-language education about what gap insurance actually does may move more drivers to add it than warnings about what could go wrong.
Frequently asked questions
What is gap insurance?
Gap insurance covers the difference — the "gap" — between what your standard auto insurance pays out after a total loss (the vehicle's market value) and what you still owe on your auto loan or lease.
Do I need gap insurance if I finance or lease my car?
Not automatically, but it's worth evaluating if you owe more on your loan than your car is currently worth, have a longer loan term, made a small down payment, or have a newer vehicle that depreciates quickly. Liberty Mutual's survey found drivers in these situations carry more risk but aren't proportionally more likely to have the coverage.
Will my regular car insurance cover my loan balance after a total loss?
Not by default. Standard auto insurance pays out based on your vehicle's market value at the time of loss, not your remaining loan balance. If your loan balance is higher than that value, gap insurance is what covers the difference. Without it, that amount is generally your responsibility.
How common is it for drivers to owe money after a total loss?
It depends on the loan and the vehicle, but it's common enough that in Liberty Mutual's survey, 57% of financed/leased drivers correctly said they could still owe money after a total-loss payout — meaning nearly 4 in 10 either didn't know or believed otherwise.
How much is gap insurance?
Gap insurance purchased through an auto insurer typically adds a modest amount to an existing policy — often well under $100 per year — though cost varies by vehicle, loan terms, and state. Gap products purchased through a dealership at the loan signing are generally priced as a one-time fee, often ranging from $400 to $700.
Methodology
Liberty Mutual's findings come from its Monthly Express Survey, a quantitative online survey fielded September 21-28, 2026, among 1,184 U.S. adults age 18 and older who have auto insurance and are the primary or shared insurance decision-maker in their household. The sample was controlled for age, gender, and household income to align with U.S. Census benchmarks; respondents working in the advertising/PR, finance, insurance, or marketing/market research industries were excluded. Findings specific to financed or leased vehicles are based on the subset of 428 respondents who reported currently financing or leasing their vehicle.
Written by Sruthi Dikkala
Sruthi Dikkala is a market researcher at Liberty Mutual who studies how consumers understand and engage with insurance brands. Her work explores brand awareness and perception, advertising strategy, and consumer understanding of insurance products and companies. She holds a Bachelor of Science in Informatics from the University of Washington.
Edited by Jess Feldman
Jess Feldman is an Editor of Liberty Mutual Resources, the company's consumer-focused insurance hub. She brings more than a decade of experience in content strategy, editorial management, and instructional communication, with a focus on translating complex, YMYL (Your Money or Your Life) topics into clear, accurate, and actionable resources for consumers. Prior to Liberty Mutual, she served as Content Manager at Course Report and Editor at ParksByNature Network. She holds an M.F.A. in Writing and a B.A. in English from the University of New Hampshire.