How does gap insurance work in Iowa?

Gap insurance pays the difference between what your car is worth and what you owe on your car loan if your vehicle is stolen or a total loss. It protects you from the financial risk of being upside down on your loan.

Let's look at an example to understand better how gap insurance works.

Assume you bought a car worth $25,000. You get into an accident, and your vehicle is totaled. But you still owe $20,000 to your lender. When you file a claim, your insurer will pay the actual cash value of your car, which is, say, $16,000. Even after the insurer pays for the actual cash value of your car, there remains an outstanding loan amount of $4,000.

Without gap insurance coverage, you'd have to pay the remaining $4,000 on the loan. If you have gap insurance, it will pay the remaining loan balance.

The table below spells this out in detail:

Worth of the car$25,000
Loan amount left to be paid$20,000
The amount the insurer pays your lender (actual cash value of your car)$16,000
Amount still due on the loan, after insurance claim payout$4,000
With gap coverageThe driver will pay off the loan without any money out of pocket.
Without gap coverageThe driver will have $4,000 out of pocket to pay off the loan.

Learn more: Can I cancel gap insurance coverage?

Cheapest gap insurance companies in Iowa

Nationwide has the cheapest gap insurance in Iowa, at about $838 per year, on average. State Farm is second on the list, followed by USAA.

Below is the list of the car insurance companies offering cheap gap insurance in Iowa, along with their average annual rates.

CompanyAverage Insurance Rates
Nationwide$838
State Farm$896
USAA$1,035
Geico$1,060
Travelers$1,084
Auto-Owners$1,231
American Family$1,408
Farmers$1,416
Allstate$1,575
Progressive$1,970

How much does gap insurance cost in Iowa?

The average gap insurance rate in Iowa is $1,300 per year, according to a rate analysis by Insurance.com.

The cost of gap insurance depends on factors like the value of your car, the car insurance company you choose, your location, and your age. Comparing quotes from at least three insurance providers before making the final decision is a good idea.

Average gap insurance cost in Iowa by city

In Iowa, gap insurance rates differ from one city to another, as insurers consider different factors, such as an area's frequency of theft, collisions, and vandalism, while calculating the rates. These factors can help insurers accurately predict the potential for claims.

Gap insurance costs are the cheapest in Iowa City, Iowa, at $1,193 per year, or $99 per month. On the other hand, Centerville has the most expensive gap insurance rates at $1,464 per year, or $122 per month. The table below lists the gap insurance costs for some cities in Iowa:

CityAverage Annual Rates
Iowa City$1,193
Altoona$1,214
Story City$1,215
Kalona$1,298
Cedar Falls$1,300
Des Moines$1,329
Ely$1,329
Lawton$1,330
Atkins$1,335
Centerville$1,464

Learn more: Can you get a gap insurance refund?

How much does gap insurance cost by age in Iowa?

The cost of gap insurance varies by age. For example, in Iowa, a 20-year-old driver can expect to pay about $2,739 per year for gap insurance, while a 30-year-old driver would pay closer to $1,428 per year for the same coverage.

Young drivers are considered riskier as they lack driving experience. Their chances of getting into an accident are four times higher than that of more mature drivers. Therefore, their rates are higher. So, if you're a young driver in Iowa, you'll probably pay more for gap insurance than an older driver.

The table below lists gap insurance costs based on age in Iowa:

AgeAverage Annual Rates
20$2,739
30$1,428
40$1,300
70$1,239

Sources:

Insurance.com gathered data with the help of Quadrant Information Services from major insurance companies across Iowa that offer gap insurance. We included rates for drivers aged 20, 30, 40, and 70. All rates are based on a driver's profile with a clean record and full coverage policy.

The coverage limit for a full coverage policy is 100/300/100 liability with a $500 comprehensive and collision deductible. The numbers 100/300/100 represent:

  • $100,000 coverage for bodily injury per person
  • $300,000 in bodily injury per accident
  • $100,000 for property damage
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Auto insurance FAQs

Is gap insurance required in Iowa?

Gap insurance is optional coverage in Iowa. But if you have a lease or loan agreement, your lender will likely require you to purchase gap insurance. But you can drop the coverage as soon as your car loan becomes lower than the value of your car.

Who should buy gap insurance in Iowa?

Consider purchasing gap insurance in Iowa if:

  • You have paid only 20% of your auto loan
  • You have financed a car for more than 60 months (five years)
  • You lease your vehicle

Also, keep in mind depreciation. A new car drops in value by about 20% in the first year of ownership and loses more than 10% of its value each year over the next four years. This means the payout you would get for the car's value is likely much less than what you owe for at least the first several years.

Where can you buy gap insurance in Iowa?

Here is where you can purchase gap insurance in Iowa:

  • From your car insurance company
  • From a company offering stand-alone gap insurance policies
  • From your car dealer
  • From the bank/financial institution that provided the loan for your car

As the rates vary from one insurance provider to another, comparing quotes from multiple sources is advised before purchasing.