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In most states, to ride your motorcycle legally on public roads, you’ll need to carry motorcycle insurance–at a minimum, liability coverage. This helps ensure you can cover the cost of any damage and injuries you cause in an accident.

But accidents aren’t always your fault, and other parties involved don’t always carry enough insurance themselves. To ensure your health and property are fully protected, you may consider adding additional coverage, even if it’s not mandatory.

The cost of motorcycle insurance will depend on what coverage you purchase and a variety of other factors. Here’s a closer look at what you need to know before you buy.

What Is the Average Cost of Motorcycle Insurance?

On average, motorcycle insurance costs between $12 and $20 per month. For comparison, auto insurance costs $173 per month on average nationwide.

These are just averages, and the actual price you will pay will vary widely, depending on your personal circumstances.

Recommended: Refinancing a Motorcycle

Factors That Affect Motorcycle Insurance Rates

In many ways, motorcycle insurance works in the same way auto insurance works. There are several factors insurers will consider when setting rates for motorcycle insurance.

Recommended: How Much Auto Insurance Do I Need?

Rider Age and Experience

Insurance premiums often depend, in part, on rider age. Younger riders have less experience, potentially ride more frequently, and may be more likely to take risks. Statistically speaking, they are more likely to get into motorcycle accidents. As a result, premiums for younger riders tend to be higher than older riders who have more experience.

Motorcycle Type

For a variety of reasons, what kind of motorcycle you ride has a big impact on premiums.

High-performance bikes with large engines capable of high speeds tend to be the most expensive to insure. That’s because they tend to have higher accident rates, and they are more expensive to repair.

In general, the value of your motorcycle will have a big impact on your rates. Determining the value of your motorcycle can be a good idea before you get insured.

Cruisers or touring bikes—built for everyday riding or long all-day trips—are bigger and tend to be slower. As a result, insurance premiums for these are lower.

Bikes that are desirable and more susceptible to theft also tend to have higher insurance premiums. Meanwhile, bikes with anti-theft and safety features might qualify for insurance discounts.

Location

Insurers will consider where you live when setting premiums. Particularly, they will look at factors such as weather patterns and risk of accidents, vandalism, and theft in your area.

Owners in urban areas may have higher premiums because of a higher risk of accidents and a greater likelihood of theft.

If you live in a warm climate where the riding season is longer, your premiums may be higher as well. Living in a place with inclement weather, such as several months of cold and snow, is less conducive to frequent riding, so premiums may be lower.

How You Use Your Motorcycle

More time spent on your bike increases the odds that you’ll be in an accident. So, if you use your motorcycle frequently—say, as your main source of transportation on your daily commute—your premiums may be higher. If, on the other hand, you’re a recreational rider who only uses your bike on the weekend, you may pay lower premiums.

Driving Record

When seeking insurance, a clean driving record is ideal. Tickets, accidents, and license suspensions can all increase the cost of insurance.

Speeding and traffic violations can increase your costs, whether they happened while you were riding your bike or driving a car. These will typically stay on your record for three years, after which they will no longer affect your insurance.

Similarly, any accident that you’ve had on your bike or while driving a car may increase your premiums. At-fault accidents, those that you caused, are the most costly. However, even accidents you didn’t cause may trigger higher costs.

Coverage Limits and Deductibles

The cost of insurance is directly linked to coverage limits and deductibles.

Some types of coverage, such as collision coverage, carry a deductible. When your motorcycle is damaged in an accident, this is the amount that you have to pay out-of-pocket before your insurance will kick in. So, if your deductible is $500 and you were in an accident with $1,000 worth of damage, you’d pay $500 first, and your insurance would pay the rest.

The higher your deductible, the less you monthly premiums will be, since your insurance company is taking on less risk.

Your coverage limit is the maximum amount that your insurance will pay. The higher the limit, the more risk the insurer is taking on, and the higher your premiums will be.

Minimum vs Full Coverage Costs

In most states, you are required to have minimum liability coverage. On average, this costs about $68 per month. Adding collisions and comprehensive insurance gives you “full coverage.”

Collision insurance pays for repairs on your bike if you are in an accident with another person or a stationary object. Comprehensive coverage can help protect you from theft, vandalism, and weather-related events. Adding these increases the price of the monthly premium to around $150 a month on average.

Ways to Lower Motorcycle Insurance Premiums

One of the best ways to ensure that your insurance premiums remain low is by maintaining a clean driving record.

Otherwise, raising your deductibles or decreasing your coverage limits can also help reduce premiums. Be aware that this means that you are accepting more risk.

You may also be able to lower your rates by bundling motorcycle insurance with other types of insurance, such as home or auto insurance.

The Takeaway

Motorcycle insurance isn’t a one-size-fits-all product. Cost can range depending on your bike, your experience, how and where you ride, and the coverage you choose. Understanding what drives the cost can help you manage it better, striking a balance between affordability and the protection you need. Before settling on a policy, make sure you read and understand all terms and conditions.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

FAQ

Is motorcycle insurance cheaper than car insurance?

Yes, on average, motorcycle insurance is cheaper than auto insurance. Typically, motorcycle insurance costs between about $12 and $20 per month, while auto insurance costs about $173 per month.

Does insurance cost more for sport bikes than cruisers?

Premiums for high-performance sports bikes tend to be higher than for cruisers.

Can you get motorcycle insurance without a motorcycle license?

You are not required to have a motorcycle license to get insurance. However, in most places, you do need a license to register your bike and to ride legally.

Does taking a safety course reduce your premium?

Yes, taking a motorcycle safety course can meaningfully reduce your premium.

Is motorcycle insurance required year-round?

Motorcycle insurance is generally purchased annually. However, if you aren’t riding it for the winter, for example, you may be able to reduce coverage, lower limits, or even cancel your policy entirely to manage costs.

Photo credit: iStock/bymuratdeniz

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q126-085

With a hybrid car or truck, you’ll pay less at the gas pump, while also shrinking your carbon footprint. But often hybrid cars cost more to insure than their conventional counterparts. So will your fuel savings be eaten up by higher insurance premiums?

The short answer: Insurance on hybrids does tend to cost more — but each driver’s costs will depend on their particular situation. And you may find that the difference in insurance costs is smaller than you think. Read on to learn more about hybrid car insurance and some methods you might use to bring your rates down.

What Is a Hybrid Vehicle?

A hybrid vehicle (HEV), such as a Toyota Prius or Ford Escape Hybrid, is called that because it runs on power from two sources: a traditional internal combustion engine (ICE) plus one or more electric motors and a battery pack.

The hybrid car mostly runs on gasoline, with assistance from electricity stored in the battery pack. The battery gets its charge in part from the ICE and in part through regenerative braking, which is a process for recapturing kinetic energy that would otherwise be lost when the driver slows down. Most hybrids don’t need to be plugged in to recharge, though plug-in hybrid electric vehicles (PHEVs) do offer that option.

The extra boost from electric motors generally helps hybrids achieve better fuel economy and lower emissions than comparable gas-powered vehicles.

How Insurance Companies Set Auto Insurance Rates

In thinking about insurance on hybrid cars, it’s worth revisiting how insurance companies typically set auto premiums. An insurer arrives at the cost of your car insurance by assessing the risk that you, the policyholder, will file a claim and estimating how much your claim might require the company to pay out.

Their calculations involve specific facts about you as well as the vehicle you want to insure. They look at customer-centered information like:

•   Your driving record and history

•   Your age and location

•   Your credit score (in many states)

•   How much you drive annually

•   The level of coverage you choose

As for the car, they consider:

•   Its make, model, and year

•   Its purchase price, repair costs, and theft risk

When hybrid cars cost more to insure, that last point is the main reason.

Recommended: Auto Insurance Terms, Explained

Are Hybrids More Expensive to Insure Than Gas Cars?

Auto insurance on hybrid cars tends to be costlier than for a gas-powered car — but not dramatically so. On average, hybrids cost around 6% more to insure than ICE cars. Price differences will vary based on a vehicle’s make, model, and year.

Why Hybrid Car Insurance Can Cost More

As a category, hybrid cars are more expensive to insure for several reasons. Here are some of the major factors that drive rates up.

Higher Repair Costs

Hybrids are more complex machines than ICE cars. Each vehicle has two power systems: a combustion engine and an electric motor. The additional components introduce more potential points of failure.

As a result, if something goes wrong with a hybrid, mechanics need to have specialized knowledge to fix it. Not every mechanic is trained to work on hybrid systems, so repair shops that specialize in this work can charge more for their expertise. Even a minor collision may damage expensive sensors or electrical components, pushing repair bills higher than a comparable gas-only car.

Battery Replacement Expenses

A new hybrid battery generally costs between $2,000 and $8,000, depending on the car’s make and model. (The average lifespan of a hybrid battery is at least 10 years, or between 100,000 and 150,000 miles.) Insurers are mindful of a hybrid car battery’s replacement cost, especially for comprehensive and collision coverage, since swapping in a new battery after an accident could require a big payout.

Advanced Technology and Sensors

Many hybrids come loaded with advanced driver assistance systems designed to improve safety. These features include lane departure warnings, automatic emergency braking, adaptive cruise control, and more. And they’re expensive. Repairing, replacing, or recalibrating a cracked sensor or damaged camera system can add thousands of dollars to a repair bill.

Vehicle Value

As a rule, hybrids cost more to buy than equivalent gas cars. The price difference between a hybrid and an equivalent gas-only car can range from zero to $3,000, according to Consumer Reports.

Because insurers base part of their premium calculations on the cost to replace or repair a vehicle, a higher sticker price naturally means hybrid cars are more expensive to insure. And autos that are prone to the most expensive car repairs will see that reflected in their rates.

Recommended: How Does Car Insurance Work?

When Hybrid Insurance May Cost the Same or Less

Despite all of these facts, it is possible to reduce or even eliminate the difference in rates.

Advanced safety features can actually work in your favor. Collision detection systems, automatic braking, and lane assist reduce the likelihood of accidents. In fact, hybrids are often among the safest vehicles on the road by insurance industry measures. Insurers who recognize these advantages may be willing to offer lower premiums.

The model of hybrid you drive matters, too. Some hybrids — particularly mid-size sedans and small SUVs — have insurance costs that are nearly identical to their gas counterparts. Meanwhile, certain makes and models may qualify for green vehicle discounts that close the gap further; your insurance company can provide more details that are specific to your situation.

And remember that your driving habits, location, and personal record are still the biggest factors in your insurance rate.

In short, the vehicle type is just one variable in a much larger equation.

Recommended: How Much Auto Insurance Do I Really Need?

How to Lower Insurance Costs for a Hybrid

Though you should be prepared to pay a little extra to insure your hybrid, there are concrete ways to lower car insurance premiums.

•   Shop around — and shop often. Insurance rates vary widely between carriers, so your best bet for scoring a lower premium is to get multiple quotes.

•   Ask about discounts. Many carriers offer explicit discounts on hybrid and electric vehicle insurance. These deals are sometimes labeled “green vehicle discounts” or “alternative fuel discounts,” and typically amount to 10% per policy period. These deals aren’t always advertised upfront, so ask directly.

•   Bundle your policies. Using the same insurance carrier for your auto coverage as you do for your home or renters policy can slice 10% to 25% off your premiums — a discount that’s available to any driver, hybrid or not.

•   Raise your deductible. Opting for a higher deductible (say, $1,000 instead of $500) reduces your monthly premium. Just make sure you have enough money set aside in savings to cover that deductible in case you need to file a claim.

•   Drive carefully to keep your record clean. Just one moving violation can be enough to hike your premiums. Consider defensive driving courses and usage-based programs, which often reward careful drivers with additional discounts.

Is Insurance More Expensive for Plug-In Hybrids?

PHEVs generally cost more to buy than standard hybrids due to their larger battery packs and their systems that enable external charging. The higher purchase price of a PHEV — sometimes a premium of $5,000 to $10,000 more, depending on the model — tends to push up the cost of insurance coverage as well.

The Takeaway

Hybrids typically cost a little more to insure — but with the right model choice, a few smart discounts, and some comparison shopping, that premium gap can shrink considerably. And when you factor in the fuel savings, most hybrid owners come out well ahead over the long run.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

FAQ

Are hybrid cars cheaper to insure than electric vehicles?

Yes, in most cases. EV insurance tends to run significantly higher than hybrid insurance — sometimes 20% or more — due to EVs’ higher purchase prices, larger and more expensive battery packs, and greater specialization required for repairs. Hybrids, which share repair infrastructure with gas vehicles, tend to occupy a more affordable middle ground.

Does a hybrid battery increase insurance premiums?

It can, yes. Hybrid battery replacement costs range from $2,000 to $8,000, and insurers factor this pricing into their rates for comprehensive and collision coverage. However, the impact varies by insurer and model.

Do insurance companies offer discounts for eco-friendly vehicles?

Many do. Often known as “green vehicle discounts” or “alternative fuel discounts,” these price breaks tend to be around 10% per policy period. The discount may not be applied automatically, though, so you often have to ask about it when getting a quote or renewing your policy.

Is comprehensive coverage more expensive for hybrids?

Yes, comprehensive coverage — which protects against theft, weather damage, and other non-collision incidents — can often run higher for hybrids. In part, this stems from the risk of theft, which can be higher for hybrids, since their batteries contain valuable precious metals. However, to some insurers, hybrids’ strong safety ratings may help offset the theft risk.

Do the make and model of a hybrid affect insurance costs?

Absolutely. An economical hybrid SUV like the Toyota RAV4 Hybrid can cost far less to insure than a luxury hybrid like the Porsche Cayenne. The vehicle’s purchase price, safety record, repair costs, theft rates, and claims history are all accounted for by the insurer’s model-specific calculations.

Photo credit: iStock/Brycia James

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q126-090

Group term and voluntary term life insurance are both offered by employers and other organizations, providing convenient and low-cost baseline coverage. But depending on the employer, coverage may not be as comprehensive as you need.

Let’s explore what group term life insurance is, how it’s different from voluntary term, and who should take advantage of these policies. You’ll also find out what portion of group term life insurance benefits is taxable and whether premiums are tax-deductible.

Group Term Life Insurance, Defined

So, what is group term life insurance exactly? Term life insurance covers a policyholder for a set amount of time, hence the “term” part. (This roundup of life insurance terminology can be helpful for the uninitiated.) It pays a death benefit to beneficiaries, usually family members or other dependents, if the insured person dies within that time frame.

Group term life insurance, meanwhile, is simply a policy offered to a group — either by an employer, trade union, or other organization — often at no cost to the employee. Group life insurance is sometimes referred to as employer-provided life insurance.

How Group Term Life Insurance Works

Group term life insurance coverage usually covers the timeframe of your employment. (When it’s not purchased through an employer, terms range from 10 to 30 years.) All premium payments and death benefits tend to be fixed. If you live past the end date on the policy, no benefit is paid, and the premium payments are forfeited.

This type of policy is sometimes referred to as a “pure” life insurance product. That is, it has no cash value, while other types of life insurance do.

In group policies, many employers pay for baseline coverage for the employee, who pays nothing. Additional term life policies may be available at an affordable rate to cover your spouse, child (learn why life insurance for children may be necessary), or other dependent, with premiums deducted from payroll. Since an employer or similar entity is buying the coverage for many people at once, their savings are passed along to the members.

Recommended: Why Is Life Insurance Important?

What Group Term Life Insurance Typically Covers

Often, group policies pay out the equivalent of 1-2 years’ salary. Group term may cover fewer causes of death than other policies, but it generally includes critical illness. Death by self-inflicted wounds may be excluded for the first two years of the policy.

Pros and Cons of Group Term Life Insurance

Group term life insurance has its advantages and disadvantages.

Pros of Group Term Life Insurance:

•   Cost: Baseline policies are often free.

•   Availability: There’s usually no medical exam or other strict requirements.

•   Simple application: Often, you just check a box or sign a form.

•   Coverage when you need it: Families have some coverage in the event their main source of income is lost.

Cons of Group Term Life Insurance:

•   Low payout: Coverage is typically on the low side, equivalent to 1-2 years’ salary at most. Experts typically recommend that life insurance cover 10 times your salary or more, depending on your financial obligations.

•   Lack of choice: A single policy is typically selected by your employer to cover all members, regardless of your situation.

•   Non-portable: If you leave your job, you lose your coverage.

Requirements of Group Term Life Insurance

Requirements are minimal and usually involve being a permanent employee. You may need to be employed for a certain period of time (say, 90 days) before qualifying. There is typically no medical exam required, but individual workplace requirements can vary.

Voluntary Term Life Insurance, Defined

Similar to group term life insurance, voluntary policies are offered by an employer or membership group. However, voluntary policies are entirely optional (i.e., voluntary) benefits you can purchase. Because your employer negotiates a group rate, it’s usually more affordable than purchasing online insurance yourself.

If you’re curious about non-employer-based policies, here’s a helpful look at how to buy life insurance.

As with group term, voluntary term life insurance has no cash value or options for investing your premiums. (Whole life insurance does have cash value. Here’s a good comparison of term vs. whole life insurance.)

How Voluntary Term Life Insurance Works

As with most life insurance, voluntary term pays out a lump sum to your beneficiaries if you die while the policy is in effect. Premiums are deducted from your paycheck as well.

Voluntary term life insurance coverage may be offered annually. You can choose to re-up, change, or cancel during your company’s open enrollment period. Keep in mind that rates go up over time, either annually or as you enter a new age bracket.

Recommended: How Long Do You Have to Have Life Insurance Before You Die?

What Voluntary Term Life Insurance Typically Covers

With voluntary term life insurance, you can select your amount of coverage, usually in multiples of your salary. The more coverage you select, the higher your premium will be.

Limitations may be set as to the level of coverage you can choose or the availability of certain riders, compared to individual life insurance. Coverage also varies by employer. However, your voluntary policy should have the same coverage options and exclusions as your group term policy.

For lower coverage amounts, no medical information may be required. Higher coverage amounts often require a health questionnaire or medical exam.

Pros and Cons of Voluntary Life Insurance

As you may have guessed, the advantages and disadvantages of voluntary term insurance are similar to those of group term insurance. However, they’re not identical.

Pros of Voluntary Term Life Insurance:

•   Low cost: While not free, premiums are normally more affordable than those for individual policies due to the employer’s group discount. You can learn about typical premium costs by looking at how much life insurance is.

•   No medical exam: No medical exam is required for less coverage. If you’re older or have health issues, you can usually get a better deal through voluntary term plans than on their own.

•   Simplicity: You just need to select the level of coverage you want.

•   More complete coverage: Because you can choose your level of coverage, payout benefits could cover loved ones completely in case of your death.

•   Portability: If you leave your job, you may be able to keep your coverage, but your premiums may rise significantly.

Cons of Voluntary Term Life Insurance:

•   Limitations: You’re limited to a single insurance company. There may also be limits to the level of coverage and available policy riders.

•   Short-term solution: If you don’t plan on staying with your company long-term, you may be better served by an individual policy.

Main Difference Between Voluntary and Group Term Life Insurance

Group term life insurance is typically free through your employer, while voluntary term is an optional benefit you can purchase at a reduced rate. Also, voluntary term insurance usually offers different levels of coverage, while group term insurance is provided at one level for all employees.

If you’re still not clear on the differences, this high-level introduction to what is life insurance may be useful.

Requirements for Voluntary Term Life Insurance

Like basic group insurance, requirements are minimal aside from a potential waiting period for new employees. There’s typically no medical exam required, but individual workplace requirements can vary.

Is Group Term Life Insurance Taxable?

There are two components to group term life insurance that pertain to taxes: premiums and payouts.

Are Group Term Life Premiums Tax-Deductible?

Life insurance premiums are usually not tax-deductible. The IRS considers such premiums a “personal expense,” though there may be exceptions for beneficiaries that are charitable organizations. (SoFi does not provide tax advice. Please consult with a tax professional before making any decision.)

Are Group Term Life Payouts Taxable?

The first $50,000 of payouts from group term life insurance carried by an employer is excluded from taxes. After that, the benefit is counted as income and subject to income tax as well as Social Security and Medicare taxes.

The Takeaway

Term life insurance typically pays out a lump sum equal to a multiple of your salary upon your death. It has no cash value or investment options. Employers, unions, and other organizations may offer group term life insurance as a free benefit, but you could upgrade your coverage with voluntary term life insurance at a low cost, deducted from your paycheck.

Voluntary term policies can be a valuable option if you’re an older employee or have health problems because premiums are low and a medical exam is usually not required. However, group policies can have limitations that make them less comprehensive than individual policies.

SoFi has partnered with Ladder to offer competitive term life insurance policies that are quick to set up and easy to understand. Apply in just minutes and get an instant decision. As your circumstances change, you can update or cancel your policy with no fees and no hassles.

FAQ

What are the disadvantages of group term insurance?

Coverage amounts tend to be much smaller than what experts recommend. You’ll need to use the insurance carrier chosen by your employer, and if you leave your job, you’ll lose the policy.

What happens to my group life insurance when I retire?

Retirees may have the opportunity to continue paying for their life insurance. Before you retire, explore your options, comparing costs and benefits.

Is group term life insurance the same as life insurance?

Group term life insurance is one type of life insurance that pays out a lump sum upon the policyholder’s death. It has no cash value, unlike whole life policies, which are another type of life insurance.

Photo credit: iStock/akinbostanci

Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
Ladder offers coverage to people who are between the ages of 20 and 60 as of their nearest birthday. Your current age plus the term length cannot exceed 70 years.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q126-065

Gap insurance is additional coverage that drivers can purchase to pay off their auto loan after their primary coverage pays out for a totaled or stolen vehicle. This type of insurance is beneficial when a car’s depreciated value isn’t as high as the loan balance.

Gap coverage can be helpful and cost-effective, but it isn’t always worth it. We’ll discuss how gap insurance works, its pros and cons, and what it doesn’t cover.

What Is Gap Insurance?

Not everyone is familiar with gap insurance, since this car insurance term is only relevant to buyers of brand-new cars. It refers to coverage from an insurance agency or car dealership to pay your outstanding loan or lease balance if your car is totaled or stolen and you owe more than the car’s value.

Your insurance policy or lender might describe gap insurance as loan/lease gap coverage. Gap coverage is accessible only to a new car’s original owner or leaseholder. Although it is not required, many car owners who conduct personal insurance planning believe it’s worth the minimal extra cost.

Who Needs Gap Coverage?

A new vehicle will depreciate more than 40% in five years on average. Some cars depreciate more than others, especially luxury vehicles and SUVs. As a result, your car’s value can plummet during the first five years of ownership while your loan balance remains well above your vehicle’s worth.

How much car insurance you need is often based on how much you can afford. Gap insurance is particularly advantageous if you make a minimal down payment, since your loan amount will be higher. A car loan can take five years or more to pay off. The timeframe of the loan increases the chances of losing the car to an accident or theft, leaving you with an insurance payout based on massive depreciation.

Leasing a car presents a similar problem. Your insurance will cover only the car’s depreciated value. In case of loss, gap insurance can cover any additional amount you owe on the lease. Some lenders may require that drivers purchase gap insurance to obtain financing.

How Does Gap Insurance Work?

How car insurance works isn’t always intuitive. Let’s say you buy a new car for $35,000. You pay $5,000 down and take out a loan for the remaining $30,000. A few years later, your car is stolen, and you file an insurance claim. Your car is worth $20,000, but you still owe $25,000 on the car loan. After your policy’s $500 deductible, your insurance pays out $19,500.

At this point, you still owe your lender $5,500 for the auto loan. This is where gap insurance comes in. The policy pays your lender the remaining amount due, thereby erasing the debt.

How Gap Insurance Works After a Car Is Totaled

Here’s another example. Let’s say that your car gets totaled in an accident. A vehicle is “totaled” when the required repairs cost more than what the vehicle is worth. Your insurance company provides a payout for the car’s current value.

As in the case of theft, your insurance will send a payout minus the deductible (learn about the types of deductibles in insurance). But you’re still on the hook for the remainder of your car loan. Gap coverage relieves you of that responsibility, potentially saving you thousands of dollars.

Recommended: How Much Does Insurance Go Up After An Accident?

Pros and Cons of Gap Insurance

Gap insurance offers several benefits:

•   Coverage to satisfy your auto loan in full in the event of theft or total loss of the vehicle

•   Inexpensive with most insurance companies

•   Provides coverage if you can only afford a small down payment on a new vehicle

•   Is particularly useful for rapidly depreciating cars

However, it may not be worth it if:,

•   Your vehicle doesn’t end up getting totaled or stolen

•   It increases your insurance premium, which it will

•   You made a significant own payment on your car, shrinking your loan amount

•   You rarely drive

How to Choose the Right Gap Insurance

Most car dealerships sell gap insurance, but you’ll pay far less if your car insurance company adds gap coverage to your policy. Your gap insurance and comprehensive coverage will typically come from the same company.

Before purchasing comprehensive coverage for a new vehicle, ask the insurance company if it provides gap insurance. Some companies, such as GEICO and Farmers, don’t offer it.

Gap coverage from an insurance company costs about $60 annually. At a car dealership, you can pay up to $600 for a similar policy. Although you can add that cost to your auto loan, you’ll increase the interest you’ll pay.

The company you choose and the level of coverage you need will affect the price of your gap insurance.

When to Cancel Your Gap Coverage

Once you pay off your auto loan, there’s no reason to keep your gap coverage, as you won’t owe your lender anything if you total your car. However, even if you’re only midway through paying off your loan, canceling gap coverage might still make sense.

For example, assume you have $5,000 remaining on your loan. You look up your car’s estimated value on Kelley Blue Book and discover that it’s worth about $4,500. It may make sense to drop your gap insurance and risk the minor $500 financial hit if the car is totaled or stolen.

Selling or exchanging your car is another reason to cancel your gap insurance, but make sure your insurance covers your car until the day you sell it. Otherwise, an accident could cost you thousands of dollars.

If you do cancel your gap coverage, you may qualify for a partial refund. For instance, when you pay off your loan early, and the gap coverage was included in the loan, you can potentially request a refund of any prepaid premiums.

What Gap Insurance Doesn’t Cover

Gap insurance can be incredibly useful in certain situations, but there are expenses that the policy won’t cover:

•   Your comprehensive policy deductible

•   Down payment for a vehicle

•   Extended warranties

•   Late payments and related fees on your auto loan or lease

•   Security deposits

•   Lease penalties

•   Carry-over amounts from prior loans or leases

•   Credit insurance charges for your auto loan

How to Save Money on Gap Insurance

Gap insurance policies are usually affordable when purchased from a traditional or an online insurance company. But you can offset the extra cost by following these steps:

•   Shop around: Remember, your comprehensive, collision, and gap coverage usually come from the same company, but not all insurance companies offer gap coverage. Ask about gap coverage availability and pricing before picking a policy.

•   Look into discounts: You may be eligible for reduced car insurance rates if your projected mileage is low or you have a safe driving record. Learn more about how to lower your car insurance.

•   Sign up for voluntary tracking: Your insurance company may offer a lower overall auto insurance premium if you allow them to install a tracking device in your car. You’ll have extra incentive to drive sensibly if you’re saving money.

•   Pay annually or biannually: Monthly payments for auto insurance often cost slightly more. If you can cover the annual bill upfront, you’ll reduce the total amount you pay.

Is It Worth Getting Gap Coverage?

Because gap coverage is typically inexpensive, it’s often worth purchasing it if you have a new vehicle. It may save you thousands in the event of a bad accident or car theft. Plus, if you’ve recently received your license, purchasing gap coverage is part of the essential insurance tips for first-time drivers.

However, the lower your loan balance, the less valuable gap coverage becomes. Over the years, the gap between your loan balance and your car’s value can narrow.

The Takeaway

If you’re purchasing or leasing a brand-new car, you’ll likely find gap coverage worthwhile, especially if you made a minimal down payment on your vehicle. New vehicles depreciate rapidly in the first few years of ownership, potentially leaving the owner with a loan balance that’s higher than the vehicle is worth after an accident or theft. Auto insurance only pays out the vehicle’s market value, while gap insurance can save drivers thousands for only a few dollars a month. You can also cancel gap coverage if you no longer need it.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

FAQ

Does gap insurance give you money?

Gap insurance pays off your car loan after your main coverage pays you the actual value of your totaled or stolen vehicle. This is important because depreciation can result in a loan balance that’s higher than the vehicle’s value.

Do you need car gap insurance if you have full coverage?

Full auto coverage will pay out your car’s actual market value. However, since your loan balance may be higher than your car’s value, especially in your first few years of ownership, gap insurance is advisable on top of full coverage.

How long does it take to get a gap insurance refund?

After you cancel your gap coverage, your insurance company will send you a prorated refund. This refund will generally comprise the coverage you didn’t use.

Photo credit: iStock/ollo

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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When you’re shopping for car insurance, how much is too much to pay? The answer can vary based on your driving record, age, car type, insurer, and even where you live. But knowing the average cost of coverage in your state can help as you’re comparing quotes. Here’s a look at average prices in New York and how different factors can impact how much drivers there pay for protection.

How Much Does Car Insurance Cost in New York?

Drivers in New York state pay an average of $3,096 per year for auto insurance, according to a 2026 U.S. News & World Report analysis of cheap car insurance companies.

Average Car Insurance Cost in New York per Month

The average monthly cost of car insurance in New York is $258. However, the amount you pay can vary by insurer, as the chart below shows.

Average Car Insurance Cost in New York by City

Your location can influence how much you pay for car insurance in New York state. That’s because when insurers are setting rates, they often consider the local volume of traffic, accidents, and crime. People living in cities tend to pay more for car insurance than those living in small towns or rural areas. But as the chart below shows, prices can also vary by city. Here are estimates for 10 of the biggest cities in New York, arranged from lowest to highest amounts:

Average Car Insurance Cost in New York by Age and Gender of the Driver

Your age can impact your premiums. Younger, first-time drivers, for example, often pay more for coverage because they tend to have more accidents than older, more experienced drivers.

Gender can play a role, too. In New York, women may end up paying less for car insurance than men because they tend to get into fewer severe accidents.

Average Car Insurance Rates After an At-Fault Accident

As anyone who has been in a fender bender knows, car insurance rates tend to go up after an accident. New York state drivers with a clean record pay around $3,096 per year for coverage. That amount rises to an average of $3,587 for drivers who have one accident where they were at fault.

But even traffic violations can cause prices to go up. A driver with one speeding ticket on their record pays an average of $3,553 for coverage, and one driving under the influence (DUI) offense causes rates to jump to an average of $4,478.

Recommended: Car Insurance Terms, Explained

Average Car Insurance Costs for Good and Bad Credit

Your credit score doesn’t just impact your ability to secure a loan. It can also play a role in how much you pay for car insurance in most states. According to an analysis conducted by LendingTree in December 2025, drivers with poor credit pay $4,140 on average per year for coverage – 95% more than those with good credit often pay for the same policy.

What Else Affects Your Car Insurance Cost?

Here are other factors that can cause your car insurance rates to go up — or down.

Marital Status

Married drivers may qualify for more discounts than single drivers, since insurers often place them in a different risk category.

Make and Model of the Car

Your car’s safety features, accident rating, size, and overall value can all affect your insurance rates.

Amount of Coverage

The amount of coverage you need comes down to a number of factors, including your state’s minimum car insurance requirements, your budget, and your lifestyle. As a rule of thumb, the more coverage you have, the more expensive your policy will be.

The type of deductible you choose can also influence your overall costs. A deductible is the amount of money you’re responsible for after an accident before the insurance company pays its portion. With a higher deductible, you may pay less money in premiums each month, but will be responsible for a bigger share of the expenses if you get into an accident.

Insurance History

Drivers who allow their coverage to lapse may be more likely to cancel their policy, so having a reliable history with one insurer may qualify you for a lower rate. In fact, it’s possible you’ll get a better quote when switching car insurance carriers than if you purchase insurance after going a few years without it.

Recommended: How to Lower Car Insurance

How to Get Affordable Car Insurance

The cost of coverage often varies by insurer. To find affordable car insurance, it can be a good idea to shop around and compare quotes. You can search online insurance companies and compare multiple car insurance rates.

You’ll also want to figure out how much car insurance you need. Keep in mind your state’s minimum car insurance requirements as well as additional coverage you may need.

If you’re looking to lower your car insurance, there are several strategies to consider. You may want to explore different policy options; look for bundling opportunities, such as getting your home and auto insurance from the same company; ask about possible discounts; and consider whether a policy with a higher deductible makes sense for you.

Recommended: Cheapest Car Insurance Companies: Find the Cheapest Car Insurance for You

The Takeaway

Drivers in New York pay an average of $3,096 per year for car insurance. However, the amount you pay can depend on several factors, including your age, gender, driving record, credit score, marital status, and where you live. It may help to shop around and compare multiple quotes to find coverage that fits your needs and budget.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

FAQ

How much is car insurance in New York monthly?

The average cost of car insurance in New York is $258 per month. But you may end up paying a different amount based on a wide range of factors, such as your age, gender, driving record, credit score, and location.

How much is car insurance in New York for a 25-year-old?

A 25-year-old man pays an average of $3,746 per year for car insurance, according to a late 2025 analysis conducted by U.S. News & World Report. Women of the same age pay an average of $3,608 per year. Gender and age are two of several factors that can impact how much you pay for coverage.

Is $300 a lot for car insurance?

In many cases, the average monthly cost for coverage in New York is below $300. But premium amounts vary based on a number of factors. A 17-year-old male driver, for example, could very well pay more than $300 per month because of his age and lack of driving experience.

Photo credit: iStock/cmart7327

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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