Gap Insurance and Your Leased Car

You Have Good Car Lease Insurance but Did You Check on Gap Insurance?

So you have decided to lease your car or may already have a leased car. You made sure you purchased the correct car lease insurance and your leasing insurance covers everything right? Unfortunately not.

Gap Insurance Needed for a Leased Car

Gap insurance is a must for leased vehicles, especially no down payment leased cars. Getting the proper car lease insurance from your insurance agent is important, but your leasing insurance does not cover a major gap that is in every leased vehicle. The gap can occur if you total your leased vehicle. Here is how gap insurance works if you total your leased car:

How Gap Insurance Works for a Leased Car

Your leasing insurance will cover the depreciated market value at the time of the collision. In most cases, since lease payments are usually lower than if one was buying the car and since all new cars depreciate the most in the first few years, the market value of the leased vehicle is much lower than what is still owed on the lease contract. But, you are still responsible for that difference in what the insurance company will pay and what is still owed on the lease... that amount or "gap" is what gap insurance covers.

Gap Insurance Math: what you owe for lease agreement (-) the insurance company payment = amount you are still responsible for which could be thousands!

Important Information to Know About Gap Insurance for Your Leased Car

Now that you know you need gap insurance for your leased car, here are some important points to remember about gap insurance for your leased car:

·        You must carry comprehensive and collision coverage with your car lease insurance company for gap insurance to pay out.

·        Before you purchase a gap insurance policy, make sure it is not an already included coverage by the lease company, dealership, or your car leasing insurance company.

·        Be aware of what your deductible is on your car lease insurance since gap insurance does not cover your car lease insurance deductible.

·        Check to see if your lease down payment is covered in the gap insurance.

·        Don't forget that you can purchase gap insurance after your lease start date.

·        Remember that gap insurance only is applicable as long as you have abided by your lease contract rules.

·        Keep in mind that you may have to continue your lease payments until the gap insurance pays for the loss.

·        Don't confuse gap insurance with wear and tear insurance (insurance that covers wear and tear damage to leased vehicles) or your leased car's warranty - neither of these types of insurance policies are gap insurance policies and will not help you if your car is totaled or stolen.