In AB, what should I know about GAP insurance for car loans?

In Alberta, Guaranteed Asset Protection (GAP) insurance is an optional financial product designed to cover the difference between your vehicle's actual cash value (ACV) paid by your primary auto insurance after a total loss (theft or write-off) and the outstanding balance on your car loan. Given the rapid depreciation of new vehicles and current market conditions extending into 2025, which often include higher vehicle prices and longer loan terms, it's common for the loan amount to exceed the vehicle's ACV early in the financing period.

This matters significantly to consumers because without GAP coverage, you would be personally responsible for paying the remaining loan balance out-of-pocket, even after losing your vehicle, potentially leading to substantial financial strain and impacting your credit. Before purchasing GAP insurance, it is crucial to review your standard Alberta auto insurance policy for endorsements such as a "Limited Waiver of Depreciation" or "Replacement Cost Coverage." These endorsements, often available for newer vehicles, can provide similar or even superior protection by covering the original purchase price or the cost of a new replacement, effectively eliminating the 'gap' and potentially offering better value than a separate GAP policy. Always compare the terms, conditions, and costs of all options to make an informed decision that best protects your financial interests.