Gap Insurance in California (2024)
Purchasing gap insurance could protect many drivers from paying out of pocket if their car is totaled.
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Written byAngela Brown
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17+ years in insurance and personal finance writing
In-depth knowledge of home and real estate topics
Angela is an insurance and personal finance expert who uses her experience to create content that helps readers understand important and complex topics.
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Updated November 21, 2024
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Auto insurance helps protect you financially in an auto accident or incident. But if your vehicle is a total loss and you still have a car payment, your insurance coverage may not offer enough protection to pay off your loan. Gap insurance provides additional protection that covers the financial gap between what your insurance pays on your policy and what you still owe on your car loan.
Gap insurance won’t be necessary for everyone, but if you purchase or lease a new vehicle, you should consider gap coverage to help protect against being left with a bill for a vehicle you no longer have.
Quick Facts
California updated laws to minimize the cost of gap coverage.
Lenders aren’t allowed to offer financial incentives to purchase gap policies.
Gap policies provide coverage only if you owe more than the value of your car when it’s totaled.
What’s gap insurance, and how does it work?
Gap insurance is a type of optional coverage that stands for “guaranteed asset protection.”[1] One downside of purchasing a brand-new vehicle is that it depreciates immediately. The purpose of a gap insurance policy is to cover the difference between the actual cash value of your vehicle and your loan balance. Gap policies only apply if your vehicle is totaled. They don’t cover repairs.
For example, if you total your vehicle worth $15,000, and your loan balance is $16,500, the gap insurance policy will pay the extra $1,500 to cover the remaining balance. You can generally purchase a gap policy through a car dealership or a separate company.
A gap insurance policy could be a good idea if you made a smaller down payment, have an extended financing period, or are rolling over negative equity from a previous car purchase.
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What gap insurance covers in California
In 2022, the California state government passed a law tightening regulations on gap coverage.[2] The state now requires insurance companies to ensure customers know that purchasing gap insurance policies is optional. California has also taken steps to minimize the purchase of gap policies by customers who wouldn’t likely be able to use them if their newer vehicles were totaled.
The state also requires insurance companies to cap the gap waiver price at 4% of the car’s financed amount. Further, lenders and car dealerships can’t offer financial incentives for purchasing a gap policy.
Gap insurance vs. full coverage
Full-coverage insurance protects drivers against liability and offers additional protections to cover damage to your vehicle if you’re in a car accident. Full-coverage policies typically include comprehensive and collision coverages as well as liability protection.
In California, full coverage has increased minimum limits of $100,000 per person and $300,000 per accident for bodily injury, $50,000 for property damage, and $30,000 per person and $60,000 per accident for uninsured/underinsured motorist coverage.[3]
Full coverage will offer financial protection for your property, no matter who’s at fault. Full-coverage policies don’t typically include gap insurance.
Good to Know
Whether you have a full-coverage policy or liability-only insurance, you should consider paying for a gap policy if you wouldn’t be able to afford the loss of your car. While full coverage will pay the total value of your vehicle if it’s totaled, you may have an auto loan larger than the value of your car. This is where gap insurance can help.
Who needs gap insurance in California?
The Golden State doesn’t require drivers to carry gap insurance. In 2022, the state introduced a new law that requires insurers to inform consumers that it’s an optional insurance product. In addition, insurance companies and financial institutions can’t sell unusable gap policies (gap coverage on vehicles that won’t depreciate quickly enough to require additional coverage).
A gap insurance policy could make sense if you:
Made a small (or no) down payment
Are leasing a new vehicle
Purchased a new car (even with a larger down payment)
Have negative trade-in equity on a previous purchase
On the other hand, you may not need to purchase gap insurance if you made a sizable down payment on a used vehicle, qualify for low interest rates, or plan to pay your car off in five years or less.
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How to buy gap insurance in California
California drivers have a few options for purchasing a gap policy. You can buy coverage through your insurance company, a stand-alone gap coverage provider, a car dealership, or a lender. Your car dealership or lender may also offer a gap policy at the time of purchase.
You should talk to your insurance company when purchasing your vehicle to see if it provides a more affordable gap policy.
Best gap insurance companies in California
Although some major insurance companies offer gap protection, purchasing a gap product directly from the car dealership or your lender is more common. If you want gap coverage through your insurer, here are three of your best choices in California.
Allstate
| User Reviews | 4.0 |
|---|---|
| IQ Score The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-ten scale. The Insurify editorial team researches insurer data to determine the final scores. | 8.9 /10 |
| Liability Only Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages. | $169/mo |
| Full Coverage Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible. | $342/mo |
4.0
Best choiceBased on 5648 verified guest reviews and ratings
How drivers feel about Allstate
Drivers appreciate the initial pricing and overall service but dislike the frequent rate increases and misleading pricing tactics.
AI-generated from the text of verified reviews collected by Insurify
Best For
Accident forgiveness
Wide availability
Cheap rates
How drivers feel about Allstate
Drivers appreciate the initial pricing and overall service but dislike the frequent rate increases and misleading pricing tactics.
AI-generated from the text of verified reviews collected by Insurify
Best For
Accident forgiveness
Wide availability
Cheap rates
Reviews (3,073)
Rodney
November 20, 2024
Verified Review
Lower Insurance
The insurance is too high.
Lyudmila
November 14, 2024
Verified Review
No Discount for Seniors
The service is mediocre.
Latonya
November 12, 2024
Verified Review
Not Recommended
I would not recommend Allstate. They did not support me when I needed them most. They didn't believe me or the other party when we said my first accident wasn't my fault. My agent incorrectly reported to the DMV that my insurance had lapsed when it hadn't. They increased my insurance rates four to five times within two years. A representative from my agent's office called me to sell renters insurance, promising a lower monthly rate, which turned out to be false. After I was involved in a hit and run, instead of ensuring my wellbeing, they raised my insurance again to almost $800/month. I find Allstate to be a disappointing car insurance company and I wouldn't recommend them to anyone.
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
833NAIC Index
Average amount of customer complaints relative to competitors on a 0-5 scale. A lower score represents fewer complaints.
0.94A.M. Best
A.M. Best analyzes an insurer’s financials, operating performance, business profile, and other factors to generate an opinion-based rating of a company’s financial and credit strength. Ratings range from A++ (exceptional) to D (poor).
A-Why we picked this company
Although Allstate’s average monthly rates are higher than some others, it’s a stable company with a fair reputation. Allstate offers several discounts, including new car discounts and multi-policy discounts that could help you save money.
Pros
Ample opportunities for bundling discount
Offers a pay-per-mile option
A+ (Superior) financial strength rating from AM Best
Cons
Low customer satisfaction
Rates are merely average compared to other insurers
Below-average rank for customer satisfaction in many regions, according to J.D. Power’s 2024 U.S. Auto Insurance Study
Dairyland
| User Reviews | 3.6 |
|---|---|
| IQ Score The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-ten scale. The Insurify editorial team researches insurer data to determine the final scores. | 7.0 /10 |
| Liability Only Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages. | $91/mo |
| Full Coverage Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible. | $236/mo |
3.6
A solid optionBased on 246 verified guest reviews and ratings
How drivers feel about Dairyland
Drivers appreciate the low prices, honesty, and good customer service but dislike the frequent rate increases.
AI-generated from the text of verified reviews collected by Insurify
Best For
Hard-to-insure drivers
Customer satisfaction
RV and motorcycle coverage
How drivers feel about Dairyland
Drivers appreciate the low prices, honesty, and good customer service but dislike the frequent rate increases.
AI-generated from the text of verified reviews collected by Insurify
Best For
Hard-to-insure drivers
Customer satisfaction
RV and motorcycle coverage
Reviews (133)
Oliver
November 5, 2024
Verified Review
Review Option
The insurance premium is too high without much coverage.
Stephen
November 5, 2024
Verified Review
Excellent
I paid them every month and they insured my car every month. It's not rocket science.
Pamela
November 4, 2024
Verified Review
Cheaper Coverage
I have recommended Dairyland to many people as they are the best I've had. However, my financial situation has changed and it's become difficult to make ends meet. So, I'm exploring options to reduce some of my bills.
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
NRNAIC Index
Average amount of customer complaints relative to competitors on a 0-5 scale. A lower score represents fewer complaints.
1.61A.M. Best
A.M. Best analyzes an insurer’s financials, operating performance, business profile, and other factors to generate an opinion-based rating of a company’s financial and credit strength. Ratings range from A++ (exceptional) to D (poor).
A+Why we picked this company
Dairyland has lower rates than many other major insurers. The company also has excellent reviews from independent websites and an A+ financial strength rating from AM Best.
Pros
Many positive customer reviews
Provides coverage to drivers who may not be able to get it elsewhere
Cons
More complaints than expected with the NAIC
Rates tend to be higher than competitors
Travelers
| User Reviews | 4.7 |
|---|---|
| IQ Score The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-ten scale. The Insurify editorial team researches insurer data to determine the final scores. | 9.0 /10 |
| Liability Only Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages. | $198/mo |
| Full Coverage Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible. | $400/mo |
4.7
Best choiceBased on 757 verified guest reviews and ratings
How drivers feel about Travelers
Drivers appreciate the lowest prices, excellent service, and responsive call centers but dislike the rising premiums and poor claims handling.
AI-generated from the text of verified reviews collected by Insurify
Best For
Numerous discounts
Gap insurance
Rideshare coverage
How drivers feel about Travelers
Drivers appreciate the lowest prices, excellent service, and responsive call centers but dislike the rising premiums and poor claims handling.
AI-generated from the text of verified reviews collected by Insurify
Best For
Numerous discounts
Gap insurance
Rideshare coverage
Reviews (389)
Nancy
November 18, 2024
Verified Review
Checking for Better Rate
Really good.
Jim
November 12, 2024
Verified Review
Typical
They were fair but within a month, they raised their premium by over $50.
Kenneth
November 5, 2024
Verified Review
Excellent
Excellent
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
829NAIC Index
Average amount of customer complaints relative to competitors on a 0-5 scale. A lower score represents fewer complaints.
0.94A.M. Best
A.M. Best analyzes an insurer’s financials, operating performance, business profile, and other factors to generate an opinion-based rating of a company’s financial and credit strength. Ratings range from A++ (exceptional) to D (poor).
A++Why we picked this company
Travelers is a good option for drivers who need affordable coverage and multiple discount options. Although Travelers charges the highest rates of these three options, its wide range of discounts makes saving on your policy easier.
Pros
Accident forgiveness available
Offers discount for hybrid and electric cars
A++ (Superior) financial strength rating from AM Best
Cons
Rideshare coverage not available in all states
High number of negative customer reviews with the Better Business Bureau
Higher-than-average number of complaints with the National Association of Insurance Commissioners
Data scientists at Insurify analyzed more than 40 million real-time auto insurance rates from our partner providers across the United States to compile the car insurance quotes, statistics, and data visualizations displayed on this page.
The car insurance data includes coverage analysis and details on drivers’ vehicles, driving records, and demographic information. Quotes for Allstate, Farmers, GEICO, State Farm, and USAA are estimates based on Quadrant Information Services’ database of auto insurance rates.
With these insights, Insurify is able to offer drivers insight into how companies price their car insurance premiums. The data included on this page represent averages across driver ages, genders, credit scores, and driver profiles for California drivers.
Gap insurance in California FAQs
Insurance products can be tricky to understand. Here are a few of the most popular questions and answers about instances when you might need gap insurance.
Does California require gap insurance?
No. Gap insurance is optional in California. California law requires dealers and lenders to inform customers that purchasing a gap policy is optional. Lenders and dealers can’t offer special financing to encourage buying a gap policy either.
Is gap insurance in California a good idea?
Gap insurance may be a good option if you have longer repayment terms, made a small down payment, or have negative equity. Gap coverage can also offer financial peace of mind if your expensive new car is totaled in an accident.
Is gap insurance refundable in California?
Sometimes. Recent state law changes require the gap insurance provider to inform you about prorated refund totals within 60 business days. If you pay your gap policy monthly, you may not have any prorated funds to refund.
What is the max gap insurance price in California?
California law requires gap protection for at least 70% of the vehicle value and caps the cost of gap insurance at 4% of the total financed amount.
Related articles
More cities in California
Sources
- Insurance Information Institute. "What is gap insurance?."
- Senate Judiciary Committee. "Motor vehicle conditional sale contracts: guaranteed asset protection waivers."
- California Department of Insurance. "Automobile Coverage Limits."
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Angela Brown
Angela Brown is a freelance writer with 17 years of professional writing and editing experience.
She specializes in finance, real estate, and insurance content. Angela uses her experience to
create easy-to-understand content that helps consumers understand tough topics better. When
she’s not working, she enjoys spending time with her family and planning vacations.
15+ years in content creation
7+ years in business and financial services content
Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.
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