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Mandy Sleight has over 15 years of insurance knowledge and expertise in auto, home, life, health, pet, supplemental benefits, and other insurance products. She’s a sought-after insurance expert, appearing in Bankrate.com, Moneygeek.com, U.S. News & World Report, Reviews.com, CNET, and other publications, and she's been writing for Compare.com since 2023.
Mandy uses her background and experience working for well-known insurance companies like State Farm and Nationwide Insurance to create engaging and easy-to-understand content that helps readers make smarter insurance choices that have a positive effect on their budgets and finances.
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Matthew Gross is an editor at Compare.com. With a background in editing and SEO, he’s passionate about creating content that helps readers get the information they need to make more informed decisions. Prior to Compare.com, Matthew brought his user-centered approach to his work with global brands like Apple and Adobe.
Matthew graduated from Illinois State University, where he earned his bachelor’s degree in Journalism.
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Guaranteed asset protection insurance, or gap insurance, covers the difference between the amount you owe on your loan or lease and your car’s actual cash value (ACV). If you total your car or someone steals it, gap coverage can help you pay off your loan if you owe more than the value of your car.
California has some of the most expensive prices for new cars, with high demand and low supply. If you finance or lease a new vehicle in California, make a small down payment, or buy a car that loses its value quickly, you should consider buying gap insurance.
California law prevents insurers from overcharging for gap insurance.
Lenders can’t offer financial incentives or require you to buy gap insurance when you buy a vehicle.
Gap insurance provides coverage only if you total your car and owe more than the car’s value.
Gap insurance covers the “gap” between your car’s ACV and what you still owe on your auto loan or lease if you total your car or someone steals it. Actual cash value is the market value of your car, not what you originally paid for it. Since vehicles can depreciate quickly, some drivers owe more than the value of their car.
For example, let’s say you total your vehicle worth $20,000 but still owe $25,000 on your loan. Without gap coverage, your insurance will pay out $20,000, and you’d still have to pay your lender the remaining $5,000 out of pocket. But with gap coverage, you won’t be on the hook for the difference.
Gap insurance is optional, but some lenders may require it for leased or heavily financed vehicles. If the lender says you need it to qualify for a car loan, they must write the cost into the sales contract and include it in the financing.[1]
You may want gap insurance coverage if you:
Finance your vehicle for five or more years
Put down less than 20%
Lease the vehicle
Buy a car that quickly depreciates
Roll over negative equity from an older vehicle
Once you’re close to paying off your lease or loan, or the balance drops below your car’s value, you may no longer need gap coverage. Unless your agreement requires it for the duration of your lease, you can cancel gap insurance anytime.[2]
Find rates starting as low as $81.
Gap insurance usually covers the difference between your vehicle’s ACV at the time of loss and your remaining loan or lease balance. Gap coverage pays out if someone steals your car or you total it in an accident.
Some gap insurance companies also cover your deductible, while others don’t. For example, if your gap insurance pays out $5,000 but you have a $500 collision deductible not covered by your policy, your insurer would reimburse you only $4,500. You would have to pay the deductible out of pocket.
Gap insurance policies vary, so you should check for exclusions before buying a policy. Some scenarios that gap insurance may not cover include:
Rolling over negative equity from a prior lease or loan
Injury and property damage expenses
Maintenance or extended warranties
Missed car payments
Routine vehicle maintenance and repair costs
Your car’s diminished value
Your comprehensive or collision deductible
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Just like with auto insurance, you should compare quotes from multiple companies to get the cheapest gap insurance in California. Here are the three most common places to buy gap coverage in California:
Some car dealerships include gap insurance in your loan, but you don’t have to buy it if your agreement doesn’t include it. Lease agreements typically include or require gap insurance. But you may pay more for gap insurance from the car dealership because they roll the cost into the financing and charge interest.
Many major car insurance companies offer stand-alone gap insurance at affordable rates. Some insurers in California offering gap insurance coverage include:
Many banks and credit unions offer gap insurance as part of your financing agreement or as a stand-alone product. You’ll typically pay a flat fee for it, which may be cheaper than buying gap insurance through a dealership.
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Gap insurance costs in California vary depending on where you buy it. If you get it from a dealership or lender, you’ll usually pay between $200 and $700. But you may save money by buying gap coverage from a car insurance company, which typically adds only around $20 per year to your insurance premiums.
You should get quotes from multiple insurers to find the best deal on gap insurance. Just don’t forget to check for exclusions, especially if you’re rolling over negative equity.
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Unlike liability insurance, California doesn’t require drivers to buy gap coverage. The Golden State has strict gap waiver laws to protect consumers. The state’s regulations include:[3]
Prohibiting mandatory gap waiver purchases: Dealers can’t require you to buy gap insurance as part of a sale or credit terms.
Requiring disclosure requirements: You must receive a notice explaining that gap insurance is optional and not conditional on credit terms or finalizing a vehicle sale.
Requiring refunds for early loan termination: If you pay your loan off early, creditors must issue a partial refund on the unused portion of the gap waiver charge.
Limiting gap waiver charges: The cost of gap insurance can’t exceed 4% of the amount you finance.
Including non-compliance penalties: You can recover three times the cost of gap coverage if the seller, lender, or insurer violates the gap insurance law.
Compare quotes from California’s top insurers and save money today.
We answered common questions about gap insurance in California to help you decide if it’s right for you.
Gap insurance in California covers the difference between your loan balance and your car’s actual cash value if you total it or someone steals it. Though policies vary, gap coverage may also cover negative equity or your deductible.
It depends. You may want gap insurance if you don’t have much to put down when buying your vehicle, if you need to finance it for a long time, or if you buy a car that depreciates quickly.
Gap insurance typically costs between $200 and $700 in California. But how much you pay for gap coverage depends on where you buy it and whether you roll it into your loan agreement. You can buy it from a car dealership or lender, but getting it from a car insurance company may cost less.
It depends. Gap insurance exclusions can vary by policy. Gap insurance typically won’t cover vehicle repairs and routine maintenance costs, deductibles, negative equity, and injuries or damage you cause to others. It usually also doesn’t cover extended warranties, missed car payments, and your car’s diminished value.
No. Gap insurance won’t pay off your loan. It covers the difference between your loan balance and your car’s actual cash value if you total it in an accident or someone steals it.
California’s gap insurance law protects consumers by requiring insurers to give partial refunds for early loan payoffs, capping charges at 4% of the financing amount, not allowing lenders to require gap coverage for credit approval, and clearly telling buyers that gap coverage is optional.
Data scientists at Compare.com analyzed more than 50 million real-time auto insurance quotes from more than 75 partner insurers in order to compile the rates and statistics seen in this article. Compare.com’s auto insurance data includes coverage analysis and details on drivers’ vehicles, driving records, insurance histories, and demographic information.
All the rates listed in this article have been collected from a combination of real Compare.com quotes and external insurance rate data gathered in collaboration with Quadrant Information Services. Compare.com uses these observations to provide readers with insights into how auto insurance companies determine their premiums.
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Mandy Sleight has over 15 years of insurance knowledge and expertise in auto, home, life, health, pet, supplemental benefits, and other insurance products. She’s a sought-after insurance expert, appearing in Bankrate.com, Moneygeek.com, U.S. News & World Report, Reviews.com, CNET, and other publications, and she's been writing for Compare.com since 2023.
Mandy uses her background and experience working for well-known insurance companies like State Farm and Nationwide Insurance to create engaging and easy-to-understand content that helps readers make smarter insurance choices that have a positive effect on their budgets and finances.
Matthew Gross is an editor at Compare.com. With a background in editing and SEO, he’s passionate about creating content that helps readers get the information they need to make more informed decisions. Prior to Compare.com, Matthew brought his user-centered approach to his work with global brands like Apple and Adobe.
Matthew graduated from Illinois State University, where he earned his bachelor’s degree in Journalism.
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