1. What is Gap Insurance?

Gap insurance covers the difference between what you owe on your auto loan and the actual cash value (ACV) of your vehicle if it's totaled or stolen. This is particularly important in Canada where vehicles depreciate quickly.

2. How Gap Calculation Works

The calculator uses the simple formula:

Where:

• \( Loan \) — Remaining balance on your auto loan
• \( ACV \) — Actual cash value of your vehicle at time of loss

Explanation: A positive gap amount means you owe more than your vehicle is worth, which is when gap insurance would be beneficial.

3. Importance of Gap Insurance

Details: In Canada, vehicles typically depreciate 20-30% in the first year. Gap insurance protects you from having to pay out of pocket when your insurance payout is less than your loan balance.

4. Using the Calculator

Tips: Enter your current loan balance and estimated ACV of your vehicle (check Canadian valuation guides like Canadian Black Book). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is gap insurance worth it in Canada?
A: Yes, especially for new vehicles, long loan terms, or small down payments where depreciation outpaces loan repayment.

Q2: How is ACV determined in Canada?
A: Insurers use Canadian valuation guides considering make, model, year, mileage, condition, and local market prices.

Q3: Does gap cover my deductible?
A: Standard gap insurance doesn't cover deductibles, but some Canadian policies offer deductible coverage as an add-on.

Q4: When is gap insurance not needed?
A: When your loan balance is less than your vehicle's value, or if you have substantial equity in the vehicle.

Q5: Can I get gap insurance in all Canadian provinces?
A: Availability varies by province and insurer, but most major Canadian insurers offer some form of gap coverage.