What is gap or loan/lease gap insurance, and do I need it?

Loan/lease gap insurance is an optional coverage that can help pay off your car loan or lease if your car gets totaled or stolen and you owe more than the car’s actual cash value.

Think of it this way: the value of a vehicle depreciates the minute you drive it off the lot. If you are financing or leasing your vehicle and it gets totaled in an accident or stolen and never recovered, you may owe more than the vehicle is worth.

For instance, if your car is worth $10,000 at the time it gets totaled in a covered incident, but you still owe $15,000 on your loan or lease, loan/lease gap coverage could pay off the remaining $5,000 so you don’t have to settle the balance out-of-pocket.

Loan/lease gap coverage does not cover carry over balances, lease penalties, overdue payments, or extended warranties. Also, you must be the original owner of the financed or leased vehicle, and the car must be purchased from a new car dealer — not a previous owner — to be eligible for this coverage.

Talk with one of our agents to explore whether this coverage is right for you.