Gap Insurance in California (2024)

Purchasing gap insurance could protect many drivers from paying out of pocket if their car is totaled.

Angela Brown
Written byAngela Brown
Angela Brown
Angela Brown
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Chris Schafer
Edited byChris Schafer
Chris Schafer
Chris SchaferSenior Editor
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Updated October 7, 2024

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Recent California car insurance prices for GMC, Toyota, Jeep , and more.

*Quotes generated for Insurify users from California within the last 10 days. Last updated on October 7, 2024

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*Quotes generated for Insurify users from California within the last 10 days. Last updated on October 7, 2024

Rates shown are real-time Insurify user quotes from 100+ insurance companies and Quadrant Information Services data. Insurify’s algorithm excludes anomalous quotes and anonymizes personal details, then displays refined quotes by price, date, and insurer popularity up to 10 days ago from October 7, 2024. Actual quotes may vary based on the policy buyer’s unique driver profile.

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.

Allstate

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User Reviews
3.1
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.
$171/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.
$341/mo

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
  • Well-established with superior ratings from A.M. Best

  • Pay-per-mile option available

Cons
  • Low customer satisfaction

  • Rates are merely average compared to other insurers

Read more driver reviews of Allstate
Steven - October 7, 2024
Verified

Allstate Cost

Shop around. I've been told their cost is higher than others.

Lynda - October 7, 2024
Verified

Got Ghosted

Don't expect a callback from the insurer after multiple attempts.

Lawrence - October 7, 2024
Verified

Catch 21

It wasn't very good. I was given one price and five months later, it increased by $128.

Dairyland

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User Reviews
3.1
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.
$87/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.
$231/mo

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

Read more driver reviews of Dairyland
Jeffrey - October 6, 2024
Verified

Best insurance company around!

I would recommend them to everyone. They are the cheapest option out there.

Ramon D - September 30, 2024
Verified

It was the best

It's better than others.

Mike Angel - September 29, 2024
Verified

More for Less

Affordability is key.

Travelers

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User Reviews
3.4
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.
$200/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.
$399/mo

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

  • Robust coverage selections and discount offerings

Cons
  • Rideshare coverage only available in Colorado and Illinois

  • High number of negative customer reviews with the Better Business Bureau

Read more driver reviews of Travelers
Steven - October 3, 2024
Verified

Solid Insurance Company for More Than 10 Years

Generally, it's good. The customer service is decent most of the time. The company is large, so it can feel less personal. The price creep is difficult, although it's probably industry-wide.

James G - October 1, 2024
Verified

Better Coverage with Allstate

When comparing policies, I found better coverage with Allstate for $800 less.

Sergio - October 1, 2024
Verified

Good for Starting

The price is great at the beginning and it's for a full year, which is a plus. However, after the first few years, the price increased significantly. Also, adding a minor or a pickup truck to the policy can be quite expensive.
  • 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.

Sources

  1. Insurance Information Institute. "What is gap insurance?."
  2. Senate Judiciary Committee. "Motor vehicle conditional sale contracts: guaranteed asset protection waivers."
  3. California Department of Insurance. "Automobile Coverage Limits."
Angela Brown
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.

Chris Schafer
Edited byChris SchaferSenior Editor
Chris Schafer
Chris SchaferSenior Editor
  • 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.

Featured in

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