Gap Insurance

Factors influencing the rate of your gap insurance costs

Gap insurance rates can vary depending on where you go and your overall driving profile. Common factors providers and dealerships will look at when calculating your rates include:

Loan/lease balance vs value (loan‑to‑value ratio)

If you owe more than the vehicle's value, you'll likely pay more for gap insurance. Ultimately, the larger the "gap" is, the higher your risk level will be.

Vehicle depreciation rate (make, model, class)

Some vehicle models depreciate faster than others. For example, luxury sedans and high-performance sports cars tend to depreciate more quickly than standard SUVs and trucks. The faster your vehicle depreciates, the more likely your gap insurance premiums will be.

Down payment amount

A larger down payment will reduce your loan balance relative to the car's value, which will lower your risk profile and lead to more affordable premiums. In contrast, if you've opted for zero-dollar financing or a smaller down payment, the cost of your gap insurance will be higher.

Length of finance or lease term

Longer loan or lease terms will increase your chances of owing more than what your car is worth. As a result, providers (whether financing companies, dealerships, or insurance providers) will charge more for your gap insurance compared to shorter terms.

Whether the deductible is included or not

Some gap insurance policies will include the deductible, while others don't. Choosing to pay the deductible can lower your premium, but it also means you'll pay out of pocket in the event of a claim.

The provider type (dealer, lender, insurer, or broker)

Where you buy gap insurance matters. Dealers often include gap insurance in their financing at a higher cost, while insurers and brokers may offer separate policies that are more flexible and affordable.

Location

Vehicle values, insurance regulations, and average claims costs vary across provinces and within provinces as well. For example, a driver in Ontario may pay a different rate than someone in Alberta or Atlantic Canada. Similarly, someone living in rural Ontario compared to downtown Toronto can also impact premiums.

Credit history or financial risk

In provinces where credit scores are considered, like Nova Scotia, lenders and insurers may use your financial profile to assess your risk level. The lower your credit score, the higher your premiums will be and vice versa.

Vehicle usage (urban vs rural, mileage)

Cars driven during rush hour or in urban areas may face higher costs compared to drivers who use their vehicles infrequently or in rural communities due to differences in collision rates and theft rates.

Whether the loan has rolled over negative equity from a previous loan

If you carried your debt over from a previous car loan to your new loan, your balance will be higher the the car's value, which creates a larger gap. This larger gap will usually translate into more expensive insurance rates.