Substance over image since 1926

Leasing Your Car(s)?

Gap coverage 

Under the terms of the loan or lease on an automobile, at the time of the total loss, there is often a difference between the amount your insurer will pay as actual cash value (under the comprehensive or collision coverage) and the amount which you owe to the entity that financed or leased the vehicle (such as a bank or auto dealer).  This difference, which can be hundreds or even thousands of dollars, is called the "gap amount".  Gap coverage pays this amount in the event of a total loss. 

Currently, you can purchase a "waiver" of the gap amount directly from the lender or dealer, who in turn has purchased gap insurance to cover the vehicle.  Alternatively, some insurers may offer a seperate policy or an endorsement to your personal automobile policy to cover this gap amount. 

In addition, some lenders and leasing companies' financing contracts state the amount of the settlement by the physical damage insurer (based on actual cash value) will be accepted as full satisfaction of the contract in the case of total loss to the vehicle.  In these cases, neither a gap waiver nor policy is necessary, as no "gap" exists. 


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We do not write insurance contracts.  Nothing we say or write here can be deemed to change any insurance contract.  Our responsibility is to give insurance advice and to suggest a match for a risk with an insurance contract from a company who will accept that risk for a premium.  We are not attorneys who can give legal interpretation to the contract between insured and their insurers.  Information here is general in nature, for the widest audience