What does GAP insurance cover on a lease?

The formal name for GAP insurance is Guaranteed Auto Protection.

In its simplest form, GAP insurance pays the difference between what your car was worth just prior to your accident and the amount left on your lease contract.

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Why You Would Need GAP Insurance

There are numerous reasons to purchase GAP insurance.

The biggest reason is that you do not want to see a large bill if you get into an accident that totals your leased car.

Here are some other factors to why you need GAP insurance:

• Low or No Down Payment – Many car dealerships do not require a down payment when you lease a car. This is to help you financially make the decision to lease.
• Rapid Depreciation – Some vehicles depreciate faster than others. If you agree to lease a vehicle with a depreciation rate that is faster than other comparable vehicles, you will want to purchase GAP insurance in order to avoid a hefty financial loss if your car gets totaled.
• Your Dealership is Requiring GAP Insurance – If you find yourself in this situation, it is best to purchase the GAP insurance from a car insurance carrier rather than the dealership in order to avoid arbitrarily inflated rates.

What GAP Insurance Does

GAP insurance is designed to cover the shortfall between what your car is worth at the time of your accident and what you still owe on your lease.

For example, if you have a car that is worth $10,000 at the time of your accident, but you still owe $15,000 on your lease, your GAP insurance would cover the remaining $5,000.

This would leave you with no financial responsibly towards the totaled car, and could also create a financial hardship, especially if you have to look for another car to lease or buy.

What GAP Insurance Does Not Do

While GAP insurance is great if you total your car, there are a few things it does not cover.

Here is what GAP insurance doesn’t cover:

• Pay Your Lease Payments – GAP insurance will not pay for any missed payments, and it will not pay your payments for you. If you get behind on your lease payments then total your car, GAP insurance will not cover the amounts for those missed payments.
• Rental Cars – GAP insurance does not pay for rentals cars. Your regular insurance policy may pay for a rental car in the event that you need a rental after a car accident.
• Car Repairs – GAP insurance does not cover routine or emergency car repairs. You will either need to pay for them from your own finances or check to see if your car warranty pays for the repairs.
• Warranties – If you added a warranty to your leased car, your GAP insurance will not cover that cost if you total your vehicle.
• Down Payments – Your GAP insurance will not provide you with any down payment money after your car has been totaled.

Should You Buy Gap Insurance

GAP insurance is a good idea for anyone who is leasing a vehicle. When you lease a car, you are essentially renting it from the dealership.

GAP insurance helps ensure that you are not responsible for paying thousands of dollars if your new or leased car gets totaled in a car accident.

Instead, the policy would pay off your remaining balance so that you can find another vehicle. Enter your zip code below for FREE car insurance quotes today!