By Paul Townsen
You may have purchased cars in the past but have decided that leasing your next vehicle is the right step this time. You did some basic research and figure that the lease insurance you selected is exactly what you need and will cover everything. However, unless you got Loan/Lease Gap insurance along with the rest of your coverage, you do not have enough insurance for your leased car.
Arranging for the right lease insurance from your car insurance agent is very important. However, regular leasing insurance doesn't cover everything. There is a gap between the value of your leased car and the amount you have paid on the car. If your car is totaled for any reason, whether it is an accident, bad weather such as a hurricane, or even theft, your insurance company can only pay the current cash value of the vehicle, which has certainly since you bought it - even if the accident occurs when you are driving home from the car dealership. The difference between what the insurance company can pay for the current value of the car and the amount still owed on the leasing contract is the gap that we are talking about. You are still responsible to the bank or other financial institution for the entire amount, so you will have to pay everything the insurance company does not cover.
Many dealerships or lending institutions will offer the gap car insurance coverage, but there are some restrictions that go along with it. You must also carry collision and comprehensive coverage in order for the gap insurance to kick in. You don't want to pay your regular insurance carrier for the gap insurance if it is already included by the dealership or car leasing company. It is also good to check on whether the down payment you made is covered in the gap insurance coverage.
If you have not kept up with the rules and regulations of your lease contract, the gap insurance cannot apply to you, so make sure you are staying current and following all the rules. This also means that even if you have had an accident, you cannot stop making your lease payments until after the insurance pays for the loss, so if it takes some time, you must not default on that loan or the gap insurance may be compromised.
If you have already leased a vehicle and did not get the gap insurance, you can always add that coverage later, as soon as you realize that you need it. Some people confuse the wear and tear insurance that is often offered for leased vehicles with the gap car insurance, and it is important to understand that these types of insurance are not the same and cannot help you if the car gets stolen or totaled.
The bottom line is that it can be very costly for you to pay the difference between the actual cash value the insurance company pays you for your totaled car and the actual amount you owe on your lease. One of the best ways to cover this gap is to purchase gap coverage along with your regular leasing policy. If you are leasing a car and don't have gap insurance, you should get it.
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