Gap Insurance in California (2024)

Guaranteed asset protection coverage is worth considering if you have an auto loan.

Anna Baluch
Written byAnna Baluch
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Anna BaluchInsurance Writer
  • 4+ years writing insurance and personal finance content

  • MBA from Roosevelt University

Anna leverages her personal finance and insurance knowledge to create educational content that helps people make smart financial decisions.

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Courtney Mikulski
Courtney MikulskiSenior Editor, Auto
  • 3+ years producing insurance and personal finance content

  • Main architect of the Insurify Quality Score

Courtney’s deep personal finance knowledge extends beyond insurance to credit cards, consumer lending, and banking. She thrives on creating actionable content.

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Updated June 7, 2023

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Imagine your insurance company declares your car a total loss and you owe more on it than it’s worth. In this situation, gap insurance might come in handy. It’s an optional policy that pays the difference between what your vehicle is worth and how much you owe on it after a total loss. Here’s what you need to know about gap insurance in California.

Quick Facts
  • Gap insurance is optional coverage that covers the difference between the amount you owe on your vehicle and its pre-loss value.

  • If you have a loan or lease on your vehicle, gap coverage is worth considering.

  • Many popular car insurance companies, like Progressive and Allstate, offer gap coverage.

What is gap insurance, and how does it work?

Guaranteed asset protection, or gap, insurance is optional car insurance that may kick in if your insurer declares your vehicle a total loss after a claim. Also known as loan or lease coverage, it’s designed to pay off your car loan or lease when your balance is more than the value of your vehicle.[1]

Let’s say you owe $20,000 on your loan and your car’s actual cash value is $15,000. If your insurer declares it a total loss, it’ll only pay you the car’s actual cash value before the theft or accident. But gap insurance covers the $5,000 “gap” or difference, after you pay your deductible, no matter who was at fault for the accident.[1]

“Think of gap insurance as peace of mind on wheels. With gap insurance, you can drive with confidence, knowing that you won’t face financial hardship if the unexpected happens,” says Rikin Shah, licensed insurance agent and founder of GetSure. “It’s a smart choice for anyone who wants to protect their investment and avoid potential financial pitfalls in the event of an accident.”

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What gap insurance covers in California

With a gap insurance policy in California, you’ll receive coverage for the following:

  • Negative equity: This is when the amount you owe on your loan or lease after an accident is more than your vehicle’s value.

  • Theft: If someone steals your car, you can file a gap insurance claim.

It’s important to note that gap insurance won’t pay for car repairs after an accident, unless your insurance company declares your vehicle a total loss. It also doesn’t cover medical bills or lost wages if you face injuries — gap coverage solely applies to vehicle damage.

Lastly, gap insurance won’t pay your loan or lease balance in the case of repossession or depreciation after an accident.

Gap insurance vs. full coverage

In California, a full-coverage policy includes comprehensive and collision insurance, as well as minimum liability coverage, which is:[2]

  • $15,000 for bodily injury per person

  • $30,000 for bodily injury per accident

  • $5,000 for property damage per accident

Even though full-coverage insurance doesn’t include gap insurance, investing in a gap policy can be a good idea. If someone steals your vehicle or your insurer declares it a total loss and you have full-coverage insurance, the most you’ll receive from your insurance company is the actual cash value of your vehicle before the incident.

If you purchase gap insurance in addition to full-coverage insurance, your insurer will cover the difference between what you owe on your loan or lease and the value of your stolen or totaled vehicle. Without gap insurance, you’ll have to pay off the remainder of your loan or lease yourself.[1]

Learn More: Does Insurance Cover Theft?

Learn More: Does Insurance Cover Theft?

Who needs gap insurance in California?

California law doesn’t mandate gap insurance. But some lenders might require it if you take out a loan or lease. If any of these situations apply to you, a gap insurance policy can be worthwhile:[1]

  • You leased or financed your car.

  • Your down payment on your car was less than 20%.

  • Your loan term is 60 months or longer.

  • You have negative equity from your previous car loan.

  • You’re a new driver with minimal experience on the road.

  • You drive a luxury vehicle that depreciates quickly.

  • You plan to drive long distances frequently.

In some cases, gap insurance might not make sense. If you’ve made a down payment of at least 20% and the chance that you’ll be upside down on your loan is slim, for example, you may want to skip gap insurance. Also, you might skip gap insurance if your vehicle’s make or model holds its value better than other vehicles. Plus, you can drop gap insurance from your policy once you pay off your auto loan.

How to buy gap insurance in California

Many car insurance companies offer gap insurance to California drivers. While dealerships often sell gap insurance as well, it’s usually cheaper if you purchase it through an insurer. If you want to get gap insurance from an auto insurer, you may be able to get a stand-alone policy. But typically, you’ll need to add it to your existing collision and comprehensive car insurance plan.[1]

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How much gap insurance costs in California

If you’d like to save as much money as possible on gap coverage, it’s wise to add it to your existing collision and comprehensive policy. Gap insurance only adds about $20 per year to your annual premium, according to the Insurance Information Institute.[1] You’ll typically pay more for gap insurance if you purchase a stand-alone policy.

Best gap insurance companies in California

If you’re in the market for a gap insurance policy in California, here are several options you may want to explore.

USAA

USAA’s gap insurance is known as “total loss protection,” but you’ll need to be affiliated with the military and join USAA to take advantage of it. USAA received an Insurify Quality Score of 4.5.

State Farm

State Farm offers a “Payoff Protector Benefit,” which is a lot like gap insurance, and you can get it if you take out a loan through State Farm Bank. The insurer earned an Insurify Quality Score of 4.4.

Travelers

Travelers gap insurance is referred to as “loan/lease gap insurance.” The company’s premiums are reasonable, and it earned an Insurify Quality Score of 4.3.

Allstate

Allstate’s gap insurance is available on new and used vehicles, as well as for drivers with loans of up to 96 months. Plus, it offers affordable rates and received an Insurify Quality Score of 4.1.

Progressive

Progressive offers affordable rates for California drivers and earned an Insurify Quality Score of 4.1. Its gap coverage is known as “loan/lease coverage.” It’ll pay up to 25% of your car’s value to help cover your loan balance.

How Insurify rates car insurance companies

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 this information, 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.

California gap insurance FAQs

If you’re looking for gap insurance in California, this additional information may help you in your search. You can also learn more in Insurify’s guide to gap insurance for used cars.

  • Is gap insurance required in California?

    California state law doesn’t require gap insurance. But some lenders may require it if you finance or lease your car.

  • Do you need collision and comprehensive before you can buy gap insurance?

    Yes. You must have collision and comprehensive coverage to purchase gap insurance. In most cases, you can add gap insurance to your existing coverage.

  • What is the maximum gap insurance price in California?

    Gap insurance can’t cost more than 4% of the amount a vehicle was financed for, according to California Assembly Bill 2311. The California Attorney General signed this bill into law in 2022.[3]

  • Is gap insurance from a car dealer cheaper or more expensive?

    A gap insurance policy from a car dealer is typically more expensive, as the dealer may bundle the gap waiver into the overall auto loan and you may have to pay interest on the financed amount.

  • Who should buy gap insurance in California?

    Gap insurance is ideal if you’re leasing or financing your car. It might also be worth it if you’ve made a low down payment, drive a luxury car, or drive long distances often.

Sources

  1. III. "What is gap insurance?."
  2. California DMV. "Auto Insurance Requirements."
  3. California Legislative Information. "AB-2311 Motor vehicle conditional sale contracts: guaranteed asset protection waivers.."
Anna Baluch
Anna BaluchInsurance Writer

Anna Baluch is a Cleveland-based personal finance and insurance expert. With an MBA from Roosevelt University, she enjoys writing educational content that helps people make smart financial decisions. Her work can be seen across the internet on many publications, including Freedom Debt Relief, Credit Karma, RateGenius, and the Balance. Connect with Anna on LinkedIn.

Courtney Mikulski
Edited byCourtney MikulskiSenior Editor, Auto
Courtney Mikulski
Courtney MikulskiSenior Editor, Auto
  • 3+ years producing insurance and personal finance content

  • Main architect of the Insurify Quality Score

Courtney’s deep personal finance knowledge extends beyond insurance to credit cards, consumer lending, and banking. She thrives on creating actionable content.

Featured in

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