How to Get Cheap Gap Insurance in California
- Several California car insurance companies offer gap coverage as a cheap add-on.
- Gap protection is not required, but it can be useful for some car loans.
- Insurance companies often have better gap plans than car dealers and lenders.
How much is gap insurance in California?
It costs $8 a month to add gap coverage to a California car insurance policy, on average. If your insurance company offers it, you usually have to get full coverage
California gap insurance costs
| Company | Monthly full coverage | Monthly gap cost | LendingTree score | |
|---|---|---|---|---|
 | Progressive | $134 | $1 |  |
 | AAA NorCal | $143 | $7 |  |
 | Mercury | $169 | $4 |  |
 | Nationwide | $187 | $7 | |
 | Travelers | $212 | $8 |  |
 | Farmers | $219 | $11 | |
 | Allstate | $252 | $14 | |
Adding gap coverage to your car insurance is cheap, but it’s not always easy to find. Some companies, including State Farm and Geico, don’t have gap insurance. AAA only offers it in Northern California.
If your current company doesn’t offer gap insurance, your options for getting it include:
- Switching to a car insurance company that offers gap coverage
- Buying gap protection from a car dealership
- Getting a gap waiver from your car loan provider
How does gap insurance work in California?
Gap insurance helps pay off your car loan if your vehicle is totaled or stolen. It’s also known as guaranteed asset protection coverage.
Full coverage car insurance covers your vehicle at its actual cash value, after age and wear. Unfortunately, cars can lose their value fast.
In some situations, your car’s value can drop below the amount you still owe for it. If your car is totaled or stolen after this happens, your insurance check won’t fully repay your loan. Gap insurance protects you from having to cover the difference out of your own pocket.
A $40,000 car may only be worth $27,000 after a few years. However, you may still owe $30,000 on it if you have a long-term loan or if you made a small down payment.
Gap insurance would cover the $3,000 difference, minus your normal car insurance deductible, if your car is stolen or totaled during this time.
The details and restrictions on gap coverage vary slightly from company to company.
- Progressive offers a form of gap coverage called loan/lease payoff. It pays up to 25% of your car’s value. If your car is worth $20,000, it covers an insurance shortfall of up to $5,000.
- You can only get loan/lease gap coverage from Travelers if you are your vehicle’s original owner. It doesn’t cover a carry-over balance from a prior car loan.
- Nationwide only offers it for cars that are 6 years old or less.
What does gap insurance not cover?
Gap insurance usually only applies to losses already covered by collision
- Your normal car insurance deductible
- Losses tied to a mechanical breakdown like a blown engine
- Fees for extended warranties or service contracts
- Missed car loan payments or late-payment charges
When is gap insurance worth it in California?
Gap insurance can be worth getting if your car’s value may drop below your loan amount. This can happen if you:
- Finance your car with a down payment of less than 20%
- Get a car loan that lasts for more than five years
- Roll debt from a previous vehicle into a new loan
- Drive more than 15,000 miles a year
If you keep up with your car payments, your loan balance will eventually fall below your car’s value. You no longer need gap insurance after this happens.
You can find estimates of your car’s value from sources like Kelley Blue Book, the National Automobile Dealers Association and Edmunds. Comparing these estimates to your loan balance can help you decide if you need gap insurance and when to remove it.
You usually need gap insurance for a leased vehicle. It covers the difference between your car’s value and your remaining payments at the time of a loss.
Some leasing companies include gap insurance in their lease agreements. Check your contract to see if you already have gap protection before you shop for it.
How does dealership gap insurance work in California?
Car dealerships often also offer gap insurance in one form or another. Some dealerships offer it as a stand-alone protection plan. Others offer it with their onsite financing. They sometimes call their plans guaranteed auto protection.
Dealership plans provide many of the same protections as insurance companies do. However, they aren’t always the best deal.
For example, one Southern California dealership sells gap protection for about $1,095. This works out to about $18 a month for a five-year loan. Many car insurance plans cost less.
You usually have to pay in full for a dealership plan, either out of pocket or with your loan. If you add it to your car loan, you pay interest for it, too. Car insurance companies simply add the cost of gap coverage to your normal bill.
To cancel gap insurance you buy from a dealership, you usually have to contact the provider to get a refund for unused coverage beyond your cancellation date.
Car insurance companies often make it easy to cancel gap coverage when you no longer need it. You can remove it from your policy at any time with no need to pay for unused coverage.
California gap waivers vs. gap insurance
Gap waivers are a form of gap insurance offered by car loan providers across California. These include banks, credit unions and dealer financing providers.
You usually have to opt in or out for a gap waiver when you buy your car. You can fold the cost into your car loan if you don’t mind paying interest on it.
A 2023 state law added important consumer protections to California gap waivers. These include:
- Cancellations: You can get a full refund if you cancel a gap waiver within 30 days. You get a prorated refund for unused coverage if you cancel after that with no early termination fees.
- Rate limits: The cost of a gap waiver cannot be more than 4% of your loan amount. This caps the rate at $1,400 for a $35,000 loan, or $23 a month over five years.
Is car insurance better for gap insurance in California?
Car insurance companies are often better for gap insurance in California than other providers. It’s cheap, and it’s easy to cancel or remove from your policy when you no longer need it.
Unfortunately, some car insurance companies don’t offer gap coverage. It’s usually not worth switching to a more expensive company just to get gap insurance. In these situations, you may be better off with the gap waiver from your loan provider.
Regardless of provider, look for these features in any gap plan you choose:
- Affordability: Gap protection should be cheap. Be wary of any plan that charges more than 4% of your loan amount, which is the limit for gap waivers.
- Adequate coverage: Check for restrictions or exclusions that may limit the amount you receive. It’s good to make sure it will cover the entire difference between your car’s value and your remaining loan balance.
- Easy cancellations: You may not need gap coverage for the entire length of your car loan. It’s good to get a plan you can cancel early with no early termination fees.
If you get gap protection from your lender or dealer when you buy your car, make sure you can get a full refund if you cancel within 30 days. This gives you time to shop for a better deal from a car insurance company.
Comparing gap insurance options
| Coverage features | Car insurance | Dealership plans | Lender gap waivers |
|---|---|---|---|
| Payment | Added to normal insurance bill | Upfront payment for life of loan | Upfront payment for life of loan |
| Interest charges | No | Yes, if financed | Yes, if financed |
| Cancellation | Yes | Usually | Yes |
| Early cancellation fees | No | Varies | No |
| Refundable | Yes | Usually | Yes |
| Limits/exclusions | Vary | Vary | Vary |
| Availability | Almost anytime | With vehicle purchase | With vehicle purchase |
Frequently asked questions
Gap insurance is not required by law in California. It is also illegal for a dealership or loan provider to make you get gap insurance for a car loan.
Yes. Gap insurance usually covers theft of your car, but only if it can’t be recovered.
Gap coverage is not available as widely for used cars as it is for new ones. The vehicle age requirements vary by provider. Gap insurance is more common for newer cars, because newer cars tend to depreciate faster than older ones.
If your car insurance company offers gap insurance, you may be able to add it to your policy later. Some car insurance companies have restrictions on how old your car can be to get this coverage. Dealerships and car loan providers, on the other hand, usually make you get their gap plans when you buy your vehicle.
Methodology
Unless noted otherwise, quotes are for a full-coverage policy for a 30-year-old man with good credit and a clean driving record who drives a 2018 Honda CR-V EX.
Coverage limits
Full-coverage policies include collision, comprehensive and liability coverage:
- Bodily injury liability: $50,000 per person, $100,000 per accident
- Property damage liability: $50,000
- Uninsured / underinsured motorist bodily injury: $50,000 per person and $100,000 per accident
- Collision: $500 deductible
- Comprehensive: $500 deductible
How we evaluated car insurance companies in California
Our team of insurance experts rated insurance companies based on several categories. These categories include average rates, discounts, coverage options, third-party customer service ratings and app/website experience. We weighted these categories based on what customers value in an insurance company.
For third-party customer service ratings, we included Complaint Index scores from the National Association of Insurance Commissioners (NAIC) and financial strength ratings from A.M. Best. NAIC Complaint Index scores are used to determine how satisfied customers are with their claims, while financial strength ratings from A.M. Best reflect the ability to pay out claims.