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Overpaying on car insurance?

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Overpaying on car insurance?

Gap Insurance California

gap insurance california
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Guaranteed Asset Protection, or GAP insurance, is a helpful tool to protect yourself if you still owe money on your auto loan or lease and the car is stolen or totaled. California drivers might consider purchasing GAP insurance, even though state law doesn’t require the added coverage.

What Is GAP Insurance?

GAP insurance is optional car insurance coverage that covers the difference between how much your car is worth and what you still owe on your auto loan. If your vehicle is totaled in an accident or stolen, and the remaining loan balance exceeds the book value, you can use gap insurance to help pay off your loan. For example, if you owe $30,000 on your auto loan, but the book value is $25,000, your insurance company will only reimburse you for the $25,000. If you have GAP insurance, you can use it to pay off the remaining $5,000.

GAP insurance covers total vehicle loss that is a result of:

  • Theft
  • An accident
  • Vandalism
  • Fire
  • A tornado, hurricane, or another natural disaster

GAP insurance does not pay for:

  • Your insurance deductible
  • An engine failure
  • Mechanical repairs
  • An extended warranty
  • Injury or death

Do You Need GAP Insurance?

If you own your car outright or don’t have many payment left on an automotive loan or lease, then GAP insurance is unnecessary. However, GAP insurance is helpful in the following circumstances:

  • You’re leasing your current vehicle.
  • You’re taking out a 60-month, or longer, automotive loan.
  • You’re making a down payment of less than 20% on your new vehicle.
  • You’re rolling negative equity from a previous loan into a new loan (ensure that you purchase a gap policy that covers negative equity).
  • You’re buying a vehicle that has a steep depreciation.

Keep in mind that not all California drivers will qualify for GAP insurance coverage. You can purchase GAP insurance if:

  • You’re the original loan or leaseholder purchasing a new vehicle.
  • Your vehicle is less than three years old.
  • You already have collision and comprehensive car insurance.

How Much Does GAP Insurance Cost In California?

GAP insurance coverage is a supplemental policy, meaning that you’re adding it to your existing coverage, which will increase your premiums. Here is the average monthly cost of adding GAP coverage to your insurance policy, depending on your provider:

  • Progressive: $153 a month
  • Travelers: $155 a month
  • SafeAuto: $186 a month
  • Freedom National: $199 a month
  • Safeco: $204 a month
  • Anchor Motor Club: $207 a month
  • Aspire: $245 a month
  • Bluefire: $259 a month
  • Stillwater Auto: $273 a month
  • Sun Coast: $276 a month

In addition to car insurance companies, you can also purchase GAP insurance from:

  • Car dealerships
  • Automotive lenders
  • Banks and credit unions

These providers typically charge more than insurance companies, especially banks, which may charge you interest on your GAP coverage. While your lender or leasing company might require you to purchase gap insurance as part of your loan agreement, you don’t have to purchase it directly from them.

California GAP Insurance Cost by Age Group

As with collision and comprehensive car insurance coverage, your insurance provider will calculate your GAP insurance premium according to your age group. Here’s what you can expect to pay, on average, based on your age:

  • Age 20 to 29: $4,182 a year
  • Age 30 to 39: $2,457 a year
  • Age 40 to 49: $2,305 a year

Keep in mind that you can cancel your GAP insurance coverage once your car’s value drops below its book value.

How to Save Money on GAP Insurance

While GAP insurance is an additional expense on top of your comprehension and collision coverage, you might save money on your car insurance by qualifying for the following discounts:

  • Good Driver Discount: If you maintain insurance coverage for more than three years and have one point or less on your driving record, California law requires your insurance provider to give you a 20% discount.
  • Driver Education Discount: If you’re 50 years of age or older, California law requires your insurance company to give you a 5% to 10% discount if you complete a state-approved defensive driving course.
  • Good Student Discount: If you have a teen driver on your insurance policy and they have a “B” average or higher, they can qualify for a good student discount. Some insurance companies extend this discount to college students who are still on their parent’s insurance policies.
  • Policy Bundling Discount: If you have multiple vehicles on one policy or car and home insurance with the same provider, you might qualify for a bundling discount.

You can also save money on your policy by shopping around for a new provider. If you don’t want to switch providers, you can still purchase a GAP insurance policy from a different company if you find one that better suits your budget.

Other Types of Coverage

In addition to GAP insurance, California drivers might want to add the following types of coverage to their insurance policies:

  • Uninsured/Underinsured Motorist Coverage: This type of insurance covers you if you’re in an accident, the other driver is uninsured, and they’re at fault. California law requires insurance providers to offer you this type of coverage when you purchase a policy. You have to sign a waiver if you don’t want to buy it.
  • Medical Payments Coverage: This coverage pays for immediate medical care after an accident, regardless of who is at fault.
  • Rental Reimbursement Coverage: If your car needs repairs after an accident, this type of coverage will reimburse you if you rent a car while yours is in the shop.

You can also purchase insurance that covers personal items like expensive stereo systems, custom wheels, navigation systems, and other vehicle customizations.

Now that you know how GAP insurance works in California, you can decide if it’s worth purchasing. If you still owe a substantial amount on your auto loan, a GAP insurance policy is sure to give you peace of mind.  

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

We’re here to help you simplify car care and save, so this post may contain affiliate links to help you do just that. If you click on a link and take action, we may earn a commission. However, the analysis and opinions expressed are our own.

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About the Author

FIXD Research Team

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

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