Gap Insurance and Car Leasing
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.
What is Gap Insurance?
Gap insurance covers the gap between what you owe on a car and what it's worth if you happened to total your car in a covered losses such as accident or theft. The types of losses covered and the extent of the coverage may vary according to the insurance company, so make sure that you clarify what's covered before availing the gap insurance.
Gap Insurance Needed for a Leased Car
For car leasing, gap insurance is a must, especially for the no-down payment leased cars. As much as the car lease insurance is important this, however, does not cover a major gap that is in every leased vehicle. The necessity of the gap can occur is you totaled your leased car in an accident. How it works? Read further below.
How Gap Insurance Works for a Leased Car
Your leasing insurance will cover the depreciated market value at the time of the collision. Usually, the car lease payments are lower when compared to buying one. Since all new cars depreciate the most in first few years, the market value of the leased vehicle is lower between what is still owed on the car 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.
Some things to take note of:
- Carry your car lease insurance company's comprehensive and collision coverage in order for the gap insurance to pay out.
- Check to see if your car lease down payment is covered in the gap insurance.
- Be aware of what your deductibles are on your car lease insurance, since gap insurance does not cover your car lease insurance deductible.
- Even if you car lease has already begun, you can still get a gap insurance
- Remember that gap insurance is only applicable if you have religiously conformed to the terms stated in car lease contract.
- Take note that until the gap insurance pays for you for the loss, you may have to continue making car lease payments.
- Gap insurance and wear and tear insurance are two different things