Lease/Loan Gap Coverage

What is lease or loan gap coverage?

Lease or loan gap coverage, sometimes called gap insurance, is meant for those who lease their vehicles. If your leased car is stolen or totaled in an accident before the lease is paid in full, you will still be responsible for paying off the balance of the lease. Your regular insurance will pay for damages or replacement up to the current value of the car you have insured. Gap coverage will help pay for the 'gap' between the current value of the car and the amount of lease.

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If I lease a car do I only need to purchase gap coverage?

No. You will need to purchase all the same insurance policies that you would choose if you were financing your car. For those with leased cars, however, gap coverage is an additional option and one well worth considering. It will cover expenses you have above and beyond the value of the car that may not be covered by your regular insurance.

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In addition, most, if not all, leasing companies will require you to purchase insurance coverage above what is required by state law. This generally includes both bodily injury and property damage liability coverage which exceeds minimum state requirements, as well as collision and comprehensive coverage. Doing so will help protect your investment (the car), as well as your lender’s investment (your car loan).

How do I know if I need gap coverage?

If you lease your car, you may feel safer with gap coverage. It all depends on your circumstance and your financial situation. It makes no sense to break your bank to cover insurance payments if it means not having enough money to buy gas to go anywhere. You should be reasonable, but cautious as well. Weigh your options and ask questions of your potential providers before making a decision.

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