Gap insurance (guaranteed asset protection or guaranteed auto protection) protects your car loan or lease if your car is totalled. With a car loan, you’re paying for a brand new car that depreciates the minute you drive it off the lot. And if your car is stolen or written off, car insurance only covers the actual value of your car, not the total amount of your car loan. Gap insurance protects you for the amount, or gap, left on your car loan.

How does gap insurance work?

You might own more on your car loan than your car is worth. Gap insurance will pay for the full value of your car so you don’t have to pay off your loan out of pocket.

• Say you took out a car loan and bought a car for $20,000. Then your car is stolen a year later.
• Your insurer pays you $15,000 for your stolen car’s value, which is what it’s worth at the time it was stolen.
• Let’s say at this time you still owe $18,000 on your car loan. Your insurance payout of $15,000 wasn’t enough to pay off the rest of your loan.
• Gap coverage would pay for the difference of $3,000 to cover the rest of your loan.
• If you didn’t have gap coverage, you’d owe the bank $3,000 on a car you no longer have.

Is gap insurance worth it?

The biggest benefit to gap insurance is that it covers you if you still owe a large amount on your car loan.

New cars are especially at risk for the first few years, since your new ride will depreciate significantly as soon as you drive it off the dealer’s lot. And if you need a car and end up with an outstanding debt after an accident, you could find it much harder to get the financing needed for a replacement vehicle.

Consider buying gap insurance if you:

• Bought or leased a new car
• Have a car loan with repayment terms of 60 months or longer
• Haven’t paid down your car’s current value on the loan
• Put a small down payment or no down payment on your vehicle
• Bought a high value car that depreciates quickly
• Need your car for transportation and have no backup ride
• Rolled over an old car loan into your new loan.

When should I skip gap insurance?

You don’t need gap insurance if you have no car loan or lease. You can generally skip gap insurance if your car loan is close to its current value, you’re close to paying off your loan or you know you can afford any losses.

• You bought your car outright without any financing.
• You set a down payment of 20% or more on your car loan.
• You paid down your car loan to its current value.
• You could afford another car if yours was totalled.
• Your policy uses your car’s agreed value instead of market value.

• What's the difference between agreed and market value?

  Agreed value	Market value
  The sum insured that has been agreed upon between you and the insurer at the time of application or renewal	Recognized as the expected value of your car on the open market This is not the trade-in value or what it would be purchased for by a collector Will pay what your car is deemed to be valued for at the time of the accident This may not include warranty costs; vehicle transfer costs; stamp duty or dealer profit

  Should I choose the agreed value or market value?
  So market value or agreed value?

  When deciding if the market value is right for you, you need to consider if the reduced amount is enough to replace your lost vehicle. Is the money you save on your premium worth the additional cost you will have to pay to purchase a new vehicle?

  That said, if you drive an older vehicle (say 10 to 15 years old), replacement cost may not be much of a concern, so it makes sense to save on the premium.

How much does gap coverage cost?

Gap insurance usually costs around 5% of your comprehensive or collision insurance premium although rates may vary. You typically only need it for a few years while you pay back your loan. You can add gap insurance to your existing car insurance policy.

Your car dealer will offer gap insurance, but it will often be very expensive, to the tune of several hundred dollars a year.

Compare free gap insurance quotes online

Sort by:

Name	Product	Accident Forgiveness	Min. Liability Coverage	Discounts Available	Online Claims	Available Provinces
Surex Auto Insurance		Yes	$1,000,000	Up to 25%		Alberta, New Brunswick, Northwest Territories, Nova Scotia, Nunavut, Ontario, PEI, Yukon	Submit one application and receive quotes from 10+ insurers. Save up to 25% on your car insurance, plus get access to an insurance advisor. Who it might be good for: Drivers looking to use an insurance broker to compare multiple pricing and coverage options.	Get a quote More Info	Compare	loading Fetching your data...

loading

CompareClear

What should I watch out for?

• Check any exclusions listed in your policy that might prevent a payout, like if you were driving under the influence and wrote off your car.
• Gap insurance is generally only available if you have comprehensive coverage. That’s typically required by your lender anyway.
• Avoid purchasing gap insurance from a dealer. Not only is it more expensive, there’s also a chance it’s a common car dealer scam. Unscrupulous car dealers might pocket your gap insurance payment without actually giving you coverage, or offer coverage with unreasonable exclusions.

Compare car loans for extra funds to cover costs

Sort by:

Name	Product	APR	Loan Amount	Loan Term	Requirements	Long Table Description
CarsFast Car Loans CarsFast Car Loans		4.90% - 29.90%	$500 - $75,000	12 - 96 months	Requirements: Min. income of $2,000 /month, 3+ months employed		Go to site More Info	Compare	loading Fetching your data...
Loans Canada Car Loans Loans Canada Car Loans		1.49% - 31.99%	$500 - $35,000	24 - 120 months	Requirements: Min. income of $1,800 /month, 3+ months employed		Go to site More Info	Compare	loading Fetching your data...
Canada Auto Finance Canada Auto Finance		4.90% - 29.95%	$500 - $45,000	3 - 96 months	Requirements: Min. income of $1,500 /month, 3+ months employed		Go to site More Info	Compare	loading Fetching your data...
Ontario Clutch Car Loans Clutch Car Loans	Ontario	From 8.49%	$7,500 - No max.	12 - 96 months	Requirements: 3+ months employed, Max.1 bankruptcy, Ontario & Nova Scotia only		Go to site More Info	Compare	loading Fetching your data...

loading

CompareClear

Bottom line

Gap insurance can keep you from paying an arm and a leg if you lose your car and still owe money on it. To save money, make sure you compare the best rates, learn what you need to know with our car insurance guide and avoid the expensive option from your car dealer.

Frequently asked questions about gap insurance

• Does gap insurance come with a deductible?

  No, gap insurance usually doesn’t come with a deductible. In some cases, it can actually pay for your collision or comprehensive coverage deductible.

  What is a deductible

  The deductible is what you’ll pay before your insurance company will pay a claim. If you file a claim for a $5,000 car repair bill with a $500 deductible, you’ll pay $500 out of your own pocket before your insurance will cover the other $4,500

• Does gap insurance always pay out on a totalled car?

  No. Gap insurance will only pay out on a totalled or stolen car if there’s a gap between what your car’s worth and what you still owe on it. For example, if your car’s insurance payout is the same as its current worth, there won’t be a gap in your loan and payout amount, so no gap coverage is needed.

  All the standard car insurance exclusions still apply, so if your car is damaged intentionally, for example, your claim would be denied.

• Is gap insurance required?

  It’s not typically required. Your loan or lease lender might require gap insurance, but you’ll have to check with your lender to find out.

• How do I make a gap insurance claim?

  You’ll make your car insurance claim for your car being written off or stolen, and your gap coverage should automatically kick in.