What is Gap Insurance?


For most drivers, a standard auto insurance policy will provide enough protection to cover the cost of repairs or replacement in the event that your car is damaged in an accident. However, if your car is totaled, often times the car’s actual cash value at the time will be lower than the amount that you owe on your lease or financing agreement, leaving a gap that requires separate insurance in order to be covered.

Why is there a gap?

Cars are often worth less than what’s owed on them for several different reasons:

  • Depreciation:

    Some cars lose up to 20% of their value the moment you drive them off the lot, and up to 30% in the first three months.
  • Longer loan terms:

    While a longer loan term might mean lower monthly payments, it also means building equity in the vehicle at a slower pace.
  • Low down payment:

    A car that’s completely or almost completely financed could be worth less than what’s owed the moment it’s driven off the lot, because a new car depreciates as soon as it’s used.

What is gap insurance?

Gap insurance (also known as gap protection) covers the gap between what your vehicle is worth and how much you owe on the car in the event that it’s stolen or totaled. While it’s not for everyone, if you’re concerned that you might not be able to cover the difference in the amount that your insurance company will give you and the amount you owe, gap insurance could be right for you.

How does gap insurance work?

Let’s say you purchase a vehicle for $25,000, put down $1,000 and have monthly payments of $330. One year after purchasing the vehicle, it is totaled in an accident.

If your auto insurance company determines that the car is worth $19,000 after one year, they will pay you that amount. You’ve made one year of monthly payments plus the down payment, totaling $4,960; you still owe $20,040 on the car. In a case like this, gap insurance would pay the $1,040 difference between what the insurance company paid you and what you still owe on the car. Without gap insurance, that money would come out of your own pocket.

Do you need gap insurance?

Not everyone needs gap insurance, but there are many situations where it could be more beneficial than others:

  • If you purchase a luxury vehicle, it’s usually a good idea to get gap insurance. Because cars tend to depreciate very quickly the moment you drive them, the more you owe on your vehicle, the more sense it makes to get gap insurance.
  • If you’re leasing a car, the monthly payments tend to be significantly lower than purchase payments. Therefore the difference between what you have paid and the value of the car can be a substantial amount of money, making it much more critical (and in some cases required) to have gap insurance.
  • If you put only a small down payment on your vehicle (less than 20%), you’re likely to owe more than your car is worth.
  • If you financed your vehicle for more than 4 years you will build equity at a slower rate, so your “gap” will take longer to disappear.
  • If you drive long distances frequently, as this can depreciate the value of the car quickly.
  • If you cannot afford to be without a car for any period of time following an accident that totals it, gap insurance will make sure you’re fully covered.

Purchasing gap insurance

Many car dealerships will offer gap insurance as part of their pitch when they are leasing or selling a car, but make sure that you do your research to find the best option for your needs.

Instead, request a gap insurance quote from your insurance agent, or an independent insurance provider.

How to make a claim

Call 1-877-251-8656 to speak with a Claims Advisor.

Renewing your policy

Call 1-877-251-8652 for information regarding policy renewal.

Buying a new policy

Call 1-866-660-9035 for information on obtaining a quote.

Need help?

Take a look at the top 5 FAQs:

  • What are my choices in terms of auto coverage?

    What are my choices in terms of auto coverage?

    If you own or drive a vehicle in Canada, you must be insured. Different provinces have different requirements, but the four mandatory elements of auto insurance are:

    1. Liability - if you cause an accident and someone sues you
    2. Accident benefits - if you or someone in your vehicle is hurt in an accident
    3. Direct compensation – property damage (Ontario only)- if your vehicle gets damaged (and it's determined you're not at-fault or only partly at-fault)
    4. Uninsured motorist - if you're in an accident with an uninsured or hit-and-run driver
  • How do I reduce my insurance costs?

    How do I reduce my insurance costs?

    There are several things you can do to reduce your insurance premium costs:

    1. Work on your driving record
      Here's an easy, yet effective way to bring down your insurance costs: build a consistent accident and conviction-free track record with an insurance company.
    2. Choose your automobile wisely
      Do your research before you invest in a new car. Read consumer reports, and check with your insurance company to find out which cars tend to be targets for theft and vandalism. Remember, if you buy a car with a high theft rate, your premium will be higher.
    3. Adjust how you use your car
      By adjusting the way you use your vehicle, you can also bring down the cost of your insurance rates. If you live in a metropolitan area:
      • can you take the subway, train or bus to work?
      • has your job changed, or have you moved recently?
      • do you use your automobile to drive a short distance to work?
      • does your vehicle get used for low annual kilometers?
        If you answered yes to any of these questions, you may be entitled to lower insurance costs. Another consideration is whether you let others use your car. It is sometimes possible to exclude certain high-risk drivers from your policy so that good drivers are not penalized with a higher premium.
    4. Choose a higher deductible
      If you choose a higher deductible up front, your premiums will be lower.
    5. Review your coverage
      Take a closer look at your coverage to make sure you're not paying for things you don't need.
  • How can I earn PC Optimum points?

    How can I earn PC Optimum points?

    When you use your President's Choice Financial Mastercard to pay your PC auto insurance premium, you'll get 20 PC Optimum points per dollar of your premium.

  • Are other drivers insured to drive my car?

    Are other drivers insured to drive my car?

    Yes, as long as he/she has your permission to drive the vehicle, has a valid driver's licence and has not been specifically excluded from driving the vehicle. However, all licensed drivers in your household must be listed on your policy—regardless of how often they use your vehicle.

  • What is a deductible?

    What is a deductible?

    A deductible is the amount that you agree to pay towards the repair or replacement of your vehicle before your insurance pays the rest. You choose your deductible amount when you purchase your auto insurance. The higher your deductible, the lower your premium.

See all Auto Insurance FAQs


We're cooking up something great!

As you explore our website, you’ll notice some pages look a little different than others. That’s because we’re in the process of redesigning our entire site.

All the information you need is still available. Watch out for more exciting changes coming soon!


Nous vous concoctons un petit quelque chose!

Lorsque vous naviguez sur notre site, vous remarquerez que l’apparence des pages varie parfois. Cela est dû à la cure de rajeunissement que subit présentement tout notre site Web.

Tous les renseignements dont vous avez besoin s’y trouvent toujours. D’autres changements excitants suivront bientôt!