How to Get Gap Insurance in Colorado
A totaled car and a loan that is bigger than the car’s value is one of the most common money shocks after a Colorado crash: the insurance check covers what the vehicle was worth, the lender wants what you still owe, and the difference lands on you. Gap coverage exists to close that hole, and this post covers where to buy it, what Colorado requires sellers to tell you, what it should cost, and what happens when the crash that wrecked the car was another driver’s fault. If you were hurt in that crash, a Denver car accident lawyer at Boesen Law can handle the injury side while the loan and the car get sorted out.
What Gap Coverage Pays, and What It Does Not
Gap stands for guaranteed asset protection, sometimes called guaranteed automobile protection. The Consumer Financial Protection Bureau describes it as coverage for the difference between your loan balance and the insurance payout when a car is stolen or totaled.
That difference exists because of how auto insurance values a car. When a car is totaled, physical damage coverage generally pays its actual cash value, minus your deductible. Actual cash value means what the car was worth the moment before the crash, not what you paid and not what you owe. New cars lose value quickly, and loans with small down payments, long terms, or rolled-in negative equity from a trade-in shrink slowly, so the two numbers can sit thousands of dollars apart for years.
Gap does not pay for your medical bills, your lost wages, or a replacement car. It pays the loan shortfall, and that is all. Everything else from the crash is a separate claim, which is where Boesen Law comes in when someone else caused it.
For answers to your questions, call:
(303) 999-9999
Three Places to Buy Gap Coverage, Side by Side
You can usually get gap from three kinds of sellers. The product is similar, but the price, the paperwork, and how you pay for it differ.
- The dealership. This is where most people are offered gap, in the finance office, on the same day as the purchase. It is convenient, but the fee is typically rolled into the loan, which means you pay interest on it for as long as the loan runs. Add-ons like gap are generally optional, and in most situations a dealer cannot require you to buy one to get financing.
- Your bank or credit union. Many lenders sell their own gap product at the time you take the loan, often for a lower price than the dealer. If you arranged financing before visiting the lot, ask the lender for its price first so you have a number to compare against the finance office.
- Your auto insurance company. Some insurers sell gap as an add-on to your policy, billed with your premium rather than financed. Insurer gap generally sits on top of collision and comp coverage, so you need both on the policy. Ask your agent before you sign at the dealership, because the quote takes minutes.
Whichever route you pick, the auto insurance coverages you already carry matter as much as the gap product itself, since gap only fills the space left after those coverages pay.
How to Get Gap Coverage in Colorado, Step by Step
Since January 1, 2024, gap sold with a Colorado car loan has had its own state law. House Bill 23-1181 created it, and it now sits at C.R.S. § 5-9.3-101 and the sections that follow. Using its rules as a checklist makes buying gap simpler:
- Figure out whether you need it. Compare what you will owe with what the car is worth. If you are putting little money down, financing for a long term, or rolling an old loan into a new one, you are the buyer gap was built for.
- Get three prices before you sign. Ask the dealer, your lender, and your insurer. For gap sold by a dealer or lender, the statute caps the fee at 4% of the amount financed or $600, whichever is greater. That cap does not reach gap regulated as insurance by the Colorado Division of Insurance, which is one more reason to compare.
- Read the bold print. The seller must give you a written notice in bold type saying gap is not required to get the loan or better terms, stating the fee, suggesting you ask an insurance agent about similar coverage, warning that benefits may shrink over the loan, confirming you can cancel within 30 days for a full refund if no covered loss has happened, and stating that gap is not a substitute for collision coverage. Nothing is final until you sign a written authorization.
- Keep the cancellation instructions. You must receive a way to cancel, with a name and a mailing address, email, or phone number, plus the written gap agreement listing its benefits, exclusions, coverage limits, and how to file a claim after a total loss.
- Put two dates on your calendar. The 30-day window for a full refund, and the date you expect to pay the loan off or refinance. You can still cancel after 30 days, but the seller may then charge a cancellation fee of up to $25.
- Ask for the refund when the loan ends early. If the loan is paid off before it matures, including through a refinance or a sale, and no gap claim was made, the original creditor must refund the unearned part of the fee. Colorado’s Attorney General has recovered more than $23.5 million for nearly 132,000 Coloradans who were owed gap refunds and did not get them.
Each of these steps protects your money before a crash ever happens, and the next section shows what the coverage does afterward.
A Worked Example: The Upside-Down Loan After a Total Loss
The numbers below are made up for illustration only. They are not averages or data, just a simple way to see how the pieces fit.
Without Gap
Say you owe $31,000 on your car loan. A driver runs a red light and totals the car. The insurer values the car at $24,500 and, after a $500 deductible, sends the lender $24,000. You still owe the lender $7,000 on a car that no longer exists, and you need another vehicle to get to work.
With Gap
Under the Colorado gap statute, the agreement must pay or waive that $7,000 balance, and the law requires it to cover your deductible, up to $500, as part of that payment. The agreement may leave out certain items if it spells them out, such as missed payments and the late fees on them, so staying current on the loan protects the benefit. You then have 90 days after the insurance settlement, or after the lender tells you what is still owed, whichever is later, to file the gap claim.
When the Other Driver Caused It
If another driver is at fault, his property damage liability coverage should pay your car’s actual cash value. Colorado’s minimum insurance requirements include only $15,000 for property damage, which may not come close to what a newer car is worth. Your own collision coverage can pay first and pursue the other driver’s insurer afterward, and gap handles what is left on the loan.
Boesen Law sees this sequence from the injured client’s side, and sorting out who pays for the car early keeps that fight from slowing down the injury claim.
Nick McWharter on Totaled Cars and the Injury Claim
Nick McWharter, who studied economics and mathematics at Skidmore College before earning his law degree at the University of Colorado, treats it as a numbers problem:
“A car loan and a car’s value run on two different curves. The loan balance drops a little each month, while the car’s value falls hardest in the first couple of years, and gap is just insurance on the space between those lines. What I tell clients is that the gap claim and the injury claim are separate, and one should not hold the other hostage. Sometimes an adjuster offers to ‘wrap everything up’ with a property payment and a small injury number in the same conversation. The car can be settled quickly, but the injury claim should wait until we know what the medical care will actually cost.”
When your car is totaled and you are hurt, that separation is worth protecting from day one.
A Case Where the Car Was Totaled
A client of ours was side-struck on Arapahoe Road by a driver going 90 mph, and the car was totaled. The injuries led to a long recovery with recurring surgeries and infections, and Boesen Law secured a $1,450,000 settlement that let the client cover medical costs and focus on healing. Crashes like that are why the firm handles high-speed accidents with outside experts from the start, and you can review other case results to see what the firm has recovered.
Contact Boesen Law After a Total Loss Crash
A totaled car pulls you in three directions at once: the lender, the insurer, and your own recovery. Boesen Law has recovered hundreds of millions of dollars for clients across Colorado, and our experience is the difference when an insurer tries to settle the car and the injuries in one cheap package. Contact Boesen Law for a free, in-person consultation. We pick up day or night, and the fee comes out of what we win, never out of your pocket up front.
FAQs About How to Get Gap Insurance
Is it too late to add GAP insurance after purchase?
Not always. Dealer and lender gap is usually offered only when you sign the loan, but some auto insurers will add gap to a policy after the sale. Insurers set their own eligibility rules, such as the age of the car and whether you are the original owner or borrower, so call your agent and ask. If you already bought gap at the dealer and found a cheaper option within 30 days, Colorado law lets you cancel gap bought with the loan for a full refund as long as no covered loss has occurred.
Can I purchase just GAP insurance by itself?
Usually not from an insurer. Insurer gap is an add-on that generally requires collision and comp coverage on the same policy. Dealer and lender gap is tied to the loan itself rather than to a policy, but it is still built to pay only after your property damage insurance pays, and Colorado requires sellers to tell you it is not a substitute for collision coverage.
How do I go about getting GAP insurance?
Ask for quotes from the dealer, your lender, and your auto insurer, compare the price and the exclusions, and read the required disclosures before you sign. Keep the cancellation instructions and the gap agreement with your loan papers, and if you pay off the loan early, request your refund in writing.
What is a reasonable cost for GAP insurance?
Prices vary widely by seller, so comparing is the only reliable test. For gap sold by a dealer or lender with a Colorado car loan, state law caps the fee at the greater of 4% of the amount financed or $600, so on a $30,000 loan the ceiling would be $1,200. Remember that a financed fee also carries interest, so the true cost of dealer gap is the fee plus the interest you pay on it. If a crash has already happened and the insurer is pushing back on your car’s value, it helps to know what to do when the insurance company denies your claim.
Call (303) 999-9999 or complete a Free Case Evaluation form
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