Guaranteed Asset Protection (GAP) insurance in Canada is an optional financial product designed to cover the monetary 'gap' that can arise if your financed or leased vehicle is declared a total loss due to an accident or theft. When a vehicle is written off, your primary auto insurer typically pays out the vehicle's actual cash value (ACV) at the time of loss, which accounts for depreciation. However, especially with new vehicles, longer loan terms, or minimal down payments, the ACV can be significantly less than your outstanding loan or lease balance.
This disparity leaves the consumer responsible for the remaining debt, a situation that is increasingly common in the Canadian market, particularly with the higher vehicle prices and extended financing terms prevalent in 2025. GAP insurance steps in to pay this difference, protecting you from a substantial out-of-pocket financial burden. While not regulated provincially as a mandatory insurance, it's commonly offered by dealerships and financial institutions across Canada, providing crucial peace of mind against unexpected debt after a total loss.