Ontario's insurance regulator is warning that drivers buying GAP coverage from unlicensed sellers could pay hundreds for policies that may never be honored.
The Financial Services Regulatory Authority of Ontario, or FSRA, issued the alert on July 23, 2026, flagging a problem hiding in plain sight at car dealerships: Guaranteed Asset Protection insurance being sold by businesses and individuals that hold no license to sell it.
GAP insurance is a familiar add-on for anyone who has financed or leased a car. It is optional, and it does one job. If a vehicle is stolen or written off, GAP covers the difference between what the car is actually worth and what the driver still owes. FSRA offers a simple example: a driver owes $30,000 on a loan, the insurer values the car at $24,000, and GAP is meant to cover the remaining $6,000.
The trouble, according to FSRA, is that some of these products are being sold by companies with no license behind them. In certain cases, the paperwork even names an insurer that never issued the policy at all.
"This is very concerning," said Jordan Solway, FSRA's executive vice president for property and casualty insurance. He noted that roughly three-quarters of car buyers lease or finance their vehicles, which means a wide pool of drivers could be handed coverage that quietly leaves them exposed. They pay hundreds of dollars, expect protection, and may end up with a policy that is not valid and claims that go unpaid.
Part of what makes the practice slippery is how it is packaged. FSRA says some sellers frame GAP products in ways designed to look like anything but insurance, sidestepping the rules meant to protect buyers. One version shows up as a "loyalty program" that promises a credit toward another car if the first one is stolen or destroyed. The label, the regulator stresses, changes nothing. It is still insurance, and anyone selling it must follow the Insurance Act.
For the industry, the message is pointed. In Ontario, insurance can be sold only by licensed insurers, agents, or brokers, and FSRA says it will keep watching the GAP market and act when it finds violations. The regulator is urging buyers to confirm the underwriting insurer, check licenses through its public search tool, and read the contract before signing.
The full warning is posted on FSRA's website at https://www.fsrao.ca/announcements/warning-ontario-drivers-may-be-left-unprotected-after-purchasing-gap-insurance.
