Commercial Auto Insurance
Do Contractors Need GAP Insurance on Work Vehicles?
GAP insurance covers the difference between your vehicle’s actual cash value and what you owe on the loan if the truck is totaled. It’s worth considering for newer financed work vehicles.
Should I get GAP insurance on my commercial work vehicle?
Commercial vehicles depreciate rapidly — often 20% in the first year. If your truck is totaled in year two, your insurer pays actual cash value (current market value), which may be $10,000–$15,000 less than your remaining loan balance. That gap comes out of your pocket.
GAP coverage (also called loan/lease gap) pays the difference between ACV and your loan payoff. It’s especially valuable in the first 1–3 years of a vehicle loan, when depreciation outpaces paydown.
Once your loan balance drops below your vehicle’s market value, GAP is no longer necessary. Many lenders offer it at closing — compare the lender’s price vs. adding it to your commercial auto policy.
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