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Gap insurance: get vehicle replacement coverage today

Contact an RH Insurance broker today to see if Optiom gap insurance is right for you. Get guaranteed vehicle replacement protection to ensure the full value of your vehicle is covered.

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What is gap insurance?

Guaranteed Auto Protection (GAP) insurance will reimburse you the difference when the insurance payment for a total loss is less than your outstanding car loan or lease. It’s additional coverage to your standard insurance policy to ensure you’re never upside-down or in negative equity if your car is a write-off. You can get GAP insurance through your dealer and some insurers.

Gap insurance, much like other varieties of similar coverage, such as an add-on or endorsement 43 (removing depreciation deduction) to your current auto insurance policy or an Optiom insurance policy, requires you to have both collision insurance and comprehensive insurance on your policy. 

According to Canadian Underwriter, nearly one-third of new car buyers are “upside-down” on a car loan. In other words, you own more on the loan than your vehicles’ value. Gap insurance pays the difference.

What is vehicle replacement coverage?

Replacement car coverage is available from your insurer as an endorsement or add-on. Following an accident, if your insurer deems your automobile a total loss vehicle, you only receive the car write-off value which could be far less than its replacement cost, or the amount left owing on your lease. 

Without vehicle replacement coverage, you could be in “negative equity” meaning you owe more in car payments than what you’ll get back from the insurer. This is especially true for old cars whose depreciation after 5 or 7 years would be far less than the cost to replace or buy a new car. 

A vehicle replacement policy pays the difference between the fair market value at the time of loss and the manufacturer’s suggested retail price of the new car. In other words, vehicle replacement fills the gap between your insurance policy limits and the price of getting a new car. 

What is Optiom Insurance?

Optiom insurance uses insurance brokers, like RH Insurance, to sell their gap insurance product as an addition to your existing auto policy. Whether it’s a new or used vehicle, Optiom offers coverage towards your lease obligations or auto loan in the event your car is a total loss.

How Optiom insurance coverage works:

  • Up to 7 years of coverage available on new cars, 5 years on used vehicles
  • You can pay monthly or annually. 
  • Vehicles up to 10 years old can qualify for coverage
  • Premiums remain the same for the length of your policy at about $25 per month
  • Requires collision and comprehensive coverage on your primary insurance policy
  • Up to $1,500 per year in rental cars while your car is in the shop
  • Optiom will pay your deductible (up to $500 per year) in the event of a partial loss
  • Key Fob Reimbursement up to $500 if keys are stolen or lost

Actual cash value vs. replacement cost

The easiest way to explain the difference is that actual cash value, or agreed value, includes depreciation. So, if you’re in an accident or if your car is stolen 2 years after you bought it, your insurance company will not give you all the money you need to buy it brand new. Your insurer will pay you the depreciated value.

If you want the full value of your car, you need a replacement cost or agreed value policy.

Agreed value insurance example

In an Agreed Value Policy (or replacement cost policy), your insurance provider agrees to pay the full value of your car at the time of writing the policy. 

For example, let’s say you buy a car worth $40,000 and a few years later you’re in a collision. Typically, most car insurance policies come standard with an actual cash value policy, meaning you’ll get the market value of your car. 

If a car depreciates by 20% as soon as you drive it off the lot, and roughly 10% per year thereafter, an actual cash value policy after 3 years of ownership will pay about $23,328. On the other hand, an agreed value policy will pay out the full value as if you were buying the same car today.

New car $40,000

Actual cash value

Agreed value

Drive it off the lot



1 year of ownership



2 years of ownership



3 years of ownership



It’s worth noting, the agreed value policy does not include inflation or “new” models, but they replace up to the value you bought the original car. A new model of the same car may be a few thousand dollars more. 

Get a free quote for vehicle replacement protection today

Find out how you can use gap insurance to increase your vehicle's financial protection. Speak with a qualified broker and recieve your custom quote.

How gap insurance compares to other forms of vehicle replacement coverage

Type of Coverage

Optiom Prime Insurance

Waiver of depreciation (Endorsement 43)

Gap Insurance




~$80-$150/year (varies by car and dealership)

New cars




Used cars




Length of coverage

5-7 years

2 years

Length of loan (~5 years)

Total loss benefit

Up to $60,000, $80,000, $100,000 (depending on price of vehicle)

The lowest of the purchase price, or the list price on the date of purchase, or the cost of replacing the car with a new one. 

The difference between what your insurance company pays out and what you still owe on the lease. 

Total loss deductible reimbursement

Up to $500



Partial loss benefit

Up to $10,000 in parts
Up to $1,000 in labour



Key Fob Reimbursement benefit

(Optional) Up to $500



Rental Vehicle Reimbursement 

(Optional) Up to $1,500

No, requires Endorsement #20


Should I get replacement cost coverage?

Replacement cost coverage is not part of a standard policy with auto insurance in Canada, but you can add it as an endorsement known as Removing Depreciation Deduction or Waiver of Depreciation. 

With car insurance in Ontario, the endorsement is OPCF43.  On a Quebec car insurance policy you can get QEF43, and finally for Alberta car insurance or Atlantic Canada, it’s known as SEF43. This endorsement “removes the insurer’s right to deduct depreciation from the value of your vehicle when settling a claim for loss or damage caused by a peril for which you are insured.” according to the Financial Services Regulatory Authority of Ontario (FSRAO).

  • You must be the original owner of the vehicle (it can’t be a used car)
  • Tires, batteries, or replacement parts from previous unrepaired damage are not eligible
  • The loss typically has to happen within 2 years from the date of purchase or lease. 

If you want protection beyond the initial 2 years or you don’t meet the eligibility requirements, that’s when a 3rd party product like Optioms gap insurance would be a worthwhile purchase.

Common gap insurance & replacement coverage questions

Is gap insurance worth it?

How do I check if a vehicle is written off?

What is your vehicle write-off value?

Can I buy gap insurance on a used car?

Does gap insurance cover the entire loan?

How does gap insurance work after a car is lost or stolen?

How much is gap insurance?

How much is Optiom insurance?

Matt Hands, Business Director of Insurance

With 6+ years of experience at, Matt’s focus has been on growing its newest business unit, Insurance. He is a thought leader and a valuable resource to respected publications across Canada. read full bio

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