What is GAP Auto Insurance in California and When Do I Need It?

clipboard with gap insurance document

GAP auto insurance which stands for “General Auto Protection,” is an add-on coverage that bridges the gap between what your car is worth and what you still owe on it when it’s totaled or stolen. 

In a perfect world, you’d never have even a fender bender while driving in California. But out here in reality land, bad things can happen to your auto even if you drive with a textbook level of safety. 

The worst of these bad things can leave your car so damaged that your auto insurance company doesn’t even want to try to pay for repairs. Their “by the numbers” thinking is that repairing it would cost more than the automobile is even worth. So they give you a flat rate based on its market value related to its age, make, and model. 

Or your ride gets stolen and ends up possibly at the bottom of some nearby lake, to be discovered in 20 years or so. 

Either way, you’re out of a car. Sure, you have a settlement check, but it might miss your loan payoff figure by a few or even several thousand dollars. One of the leading culprits of this imbalance known as “negative equity” is an economic phenomenon known as depreciation. This describes the speed with which your new car loses its value. 

What Does GAP Insurance Cost in California? 

Around $20 to $40 per year. If you’re dealing with an independent auto insurance agent, they’ll be able to shop around for the most affordable and comprehensive GAP insurance coverage policy available. In that way, it’s likely that the cost might only be $20 to $40 a year, a rate that you’ll hardly miss. But the return on this savvy investment could be enormous. 

How Quickly Does My New Car Depreciate in California? 

As soon as you drive it off the dealership lot. At least, that’s the flippant answer and there’s truth behind it. It’s immediately worth less after you’ve driven it away because it’s now considered a “used” vehicle. 

To put it another way, you’ll lose 20% of what you paid for your new car after the first year and only be able to command half of your sticker price after five years. That’s assuming your vehicle still looks to be in good shape (few if any nicks, scratches, or dents and not parked full-time near a salty California beach) and is running well for its age. 

This rate of depreciation isn’t consistent over all makes and models. Some depreciate faster than others, and a few might even retain value. And, of course, if you keep certain models long enough and in new-like condition, they might eventually become a valuable classic or vintage ride. 

That’s rare, though. The more common and realistic scenario is that your car will lose value over time — not retain or even gain it. So what happens if you have a six-year loan at a higher interest rate and you total your vehicle in an accident or lose it to thieves? 

That’s where your very affordable GAP insurance policy add-on comes to the rescue. 

man holding blackboard with gap insurance written on it

The Facts on GAP Auto Insurance in California 

GAP insurance will pay off all that you owe on your “newish” vehicle if it’s lost at the worst possible time. That would be in the first few years of ownership and loan payment, when you still owe more on the loan than your gone-forever car is worth. Or if it’s stolen and either totaled by the thieves or never found. 

Under either circumstance, you won’t be left writing a big check to your finance company even after receiving a settlement from your insurer. Not if you have GAP insurance. In other words, you’ll never be left owing more on your loan balance than your insurer will ever compensate. 

So, GAP insurance is an additional level of financial security that will protect your finances in the first few years of ownership of your new car, and it’s incredibly cheap. More on that later. 

Do I Need Affordable GAP Insurance? 

Not if you’re buying a used car, necessarily. Unless it has very high mileage. And, some new models of cars and trucks (especially trucks) maintain more of their value for longer. If that’s the case, your auto insurance claim settlement is likelier to come closer to what you actually owe on the vehicle. 

You’re also less likely to need GAP insurance if you can manage to put a hefty down payment on your vehicle, since you’ll probably owe less on your loan and pay it off faster. 

That said, you’re likelier to see the benefits of GAP insurance when 

  • You have paid little or nothing as a down payment 
  • You’ve only been paying on your loan for a short period 
  • You’ve bought a sports car or other make or model that depreciates quickly 
  • You’ve purchased a high-mileage older car 
  • You’re leasing your vehicle, since your relatively low monthly lease payment isn’t paying down its value quickly 

How Do I Get GAP Insurance in California? 

This is the best part. It’s easy to add GAP insurance to your standard auto insurance policy, and it’s very affordable coverage. You might, in fact, have to pay as little as a couple of dollars a month for this potentially valuable add-on benefit. 

Simply talk with your auto insurance agent. Explain the make and model of the new car you’re planning to buy or lease, and share information on your down payment (if any) and other financial details. 

Your auto insurance agent should be able to tell you how important GAP insurance might or might not be under your circumstances. 

Find Affordable Car Insurance in California Today 

Should GAP insurance be a part of the auto insurance policy for your next new car? Consult your Cost-U-Less independent insurance agent. Call us at (800) 390-4071. You can also get a quick car insurance quote online or use our website to find a Cost-U-Less location in California near you