How much is gap insurance in California?

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Gap insurance, offered by providers like Mercury Insurance and Progressive, protects drivers who lease or finance their vehicles by covering the difference between the car’s actual cash value and the remaining loan or lease balance if it’s totaled or stolen. This coverage is also commonly called loan or lease payoff insurance.

Where you live plays a big role in how much you’ll pay for gap insurance. Drivers in California spend about $2,510 per year, or roughly $209 per month, on average.

Key Takeaways

In the event of a total loss, gap insurance covers the difference between what you owe on your car loan and its actual cash value.
Gap insurance is available as a standalone policy or on auto insurance policies that include both comprehensive and collision coverage.
The average price of gap insurance in California is $2,510.

What is gap insurance?

Gap insurance is optional vehicle insurance coverage that helps pay off an auto loan or lease if your vehicle is totaled or stolen and you owe more than the car’s depreciated value.

Most car buyers finance their vehicles by taking out a loan. But it’s easy to forget that cars depreciate as soon as they’re driven off the lot. Often, owners are driving vehicles that are worth less than what they owe their finance company.

If that car is totaled, the owner’s comprehensive or collision insurance reimbursement will be based on the vehicle’s actual cash value, not the loan balance. If the actual cash value is below the loan balance, the owner is responsible for the difference.

However, gap insurance can make up the difference.

“When an accident or theft occurs, a driver usually gets paid out on the vehicle’s cash value from their standard insurance coverage,” says Richard Howe, a car accident attorney in Atlanta. “However, without gap insurance, you will still be on the hook for the remaining amount in your agreement. Gap insurance provides peace of mind to drivers that they will be financially protected.”

“For instance, let’s say your car is totaled and the actual cash value is determined to be $15,000. However, you still owe $20,000 on your loan. Traditional auto insurance would only cover up to the actual cash value, leaving you with a $5,000 deficit,” says Howe.

“But if you have gap insurance, this difference would be covered, relieving you of the financial burden.”

Average cost of gap insurance in California

Gap insurance rates vary depending on your insurer, location, vehicle type and other factors. In California, drivers pay an average of $2,510 per year or about $209 per month for gap coverage.

“Gap insurance is an optional coverage that is usually very reasonably priced, typically less than $100 per year in additional premium when added as an endorsement to your existing auto insurance policy,” says Mark Friedlander, senior director of media relations at the Insurance Information Institute, an insurance industry trade group.

“Gap insurance rates are based on the amount of your loan or lease agreement. It is typically not based on other common rating factors such as credit record.”

Cheapest gap insurance companies in California

In California, Mercury Insurance provides the most affordable gap insurance, at $2,076 per year or $173 each month. On the other hand, Farmers has the highest premiums at $3,177 annually or $265 monthly.

The chart below shows the average annual cost of gap insurance from various insurers in California.

Company group	Average annual premium	Gap premium
Mercury Insurance	$2,076	$45
Progressive	$2,209	$30
Travelers	$2,535	$75
Allstate	$2,730	$103
Nationwide	$2,892	$93
Farmers	$3,177	$142

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How much is gap insurance per month in California?

Gap insurance costs differ, but here’s what you might pay each month:

Company group	Average monthly premium	Monthly gap premium
Mercury Insurance	$173	$4
Progressive	$184	$3
Travelers	$211	$6
Allstate	$228	$9
Nationwide	$241	$8
Farmers	$265	$12

Gap insurance rates in California’s top cities

Gap insurance rates often depend on your location. The table below lists the average annual costs in major metro areas across California.

City	Avg. annual car insurane premium	Annual gap insurance cost
Anaheim	$2,662	$90
Fresno	$2,471	$86
Long Beach	$2,777	$96
Los Angeles	$3,272	$123
Oakland	$2,911	$109
Sacramento	$2,761	$96
San Diego	$2,407	$83
San Francisco	$2,885	$108
San Jose	$2,489	$83

Gap insurance rates for different vehicle types

Your gap insurance rate can vary depending on the make and model of your car.

“Luxury cars, sports cars, and SUVs – typically with higher purchase prices – might also come with higher gap insurance premiums. That’s because these vehicles tend to depreciate at different rates compared to standard sedans or compact cars, posing a greater risk to insurers,” Howe says.

The age of your vehicle plays an important role in how much you pay for gap insurance.

“Newer vehicles, which depreciate more rapidly in the first few years, represent a higher risk for insurers offering gap coverage. As a result, a brand-new car might attract a higher gap insurance premium compared to a model that is several years old,” Howe says. “This reflects the insurer’s risk assessment, considering the steeper depreciation curve and the greater likelihood of a significant gap needing coverage soon after the purchase.”

When does gap insurance expire?

It’s a good idea to keep gap insurance for as long as you’re financing or leasing your vehicle, since it protects you from owing more than the car’s depreciated value.

“However, gap insurance is typically most relevant during the first few years of new car ownership,” Howe says.

That’s usually when you owe more on your loan than the car is worth.

“Most car buyers benefit from gap insurance when the vehicle is less than three model years old. This coverage is usually aligned with the duration of the car loan or lease, often making it unnecessary beyond a few years because the loan balance decreases to fall below the car’s actual cash value,” Howe says.

You can cancel gap coverage once your loan balance dips below the car’s actual cash value. Many insurers automatically end the coverage after a set number of years for the same reason.

Where to buy gap insurance

Gap coverage is sold in three places, and each has its own price tag and rules:

Your auto insurer: Most national and regional carriers let you add gap as a rider to your regular policy for about $20 to $40 a year. Because it’s part of your insurance bill, you can cancel it as soon as your loan balance drops below the car’s value, so you never pay for coverage you don’t need.
Dealerships: Finance managers often offer gap insurance for $400 to $700, rolled into your loan. It’s convenient but typically the most expensive option due to added interest.
Banks and credit unions: Some lenders offer gap insurance as a standalone policy. It’s usually mid-priced, but cancellation rules vary; some refund unused premium, others don’t.

Pro tip:

If you’re leasing, review your lease agreement first. Many lessors automatically include gap protection. Buying it twice will not add extra coverage; it will just add extra cost.

Before committing, compare prices, ask about cancellation terms, and check for extras such as deductible reimbursement. A quick side-by-side quote can save you hundreds over the life of your loan or lease.

The bottom line

Comparing gap insurance rates from multiple insurers can save you money. Your state, vehicle type, and personal factors all play a role in pricing, so shopping around could help you find significantly cheaper coverage.

Whether gap insurance makes sense for you depends on the age and value of your financed or leased car. When speaking with insurers or agents, don’t hesitate to ask questions – understanding your coverage fully is key to making the right choice.

Methodology

Insure.com commissioned Quadrant Information Services in 2023 to get annual and monthly gap insurance rates for male and female drivers aged 40 who drive a Honda Accord LX with a clean driving record and good insurance score and carry a full coverage car insurance policy with limits of 100/300/100 and $500 comprehensive/collision deductibles.

To evaluate the rates, we have compared 53,409,632 insurance records from 170 insurance companies across 29,152 cities and 34,588 ZIP codes across the nation.

Frequently asked questions

Does gap insurance cover theft in California?

Gap insurance will protect you if your vehicle is stolen and not recovered. It will also protect your vehicle if it is stolen and recovered but severely damaged to the point of being regarded as “totaled” by your insurer, per Mark Friedlander with the Insurance Information Institute. However, be aware that gap insurance does not typically cover the deductible portion of your comprehensive insurance policy.

Should I get gap insurance in California?

Gap insurance is recommended so long as you have a loan or lease to cover the difference between what is owed and the depreciated value of your vehicle, according to Mark Friedlander with the Insurance Information Institute.

He recommends considering purchasing gap insurance if you have made less than a 20% down payment on the purchase of your vehicle; if you have financed the purchase for 60 months or longer; if you are leasing the vehicle (gap insurance may actually be required under the terms of a lease agreement); or if you have rolled over negative equity from an old car loan into a new loan.

Shivani Gite

Contributing Writer

Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions.