The Importance of Loan Gap Insurance

July 6, 2018

Doug has been scoping out new cars for a while. He finally decides that he would rather lease a vehicle than buy one; lower monthly payments and the ability to switch things up in a couple years with a different vehicle are attractive prospects to him and many others. After all, as of 2016, 31% of new vehicle sales were leased! Whether he leases the vehicle, or purchases the vehicle through a lienholder, adding loan lease gap coverage onto his auto policy is more affordable than purchasing it through a dealership, and provides critical protection for him! Consider this example:

One Friday afternoon, Doug is cruising home from work when he is in an accident that leaves his car in really bad shape. Angry and exasperated, Doug can only think, “At least insurance will cover it.” Unfortunately, Doug is only partly right.

You see, as beautiful as his brand-new, all-leather interior, head-turning convertible is, as soon as Doug wheeled out of the dealership, the value of his car began to depreciate. The amount that a vehicle is currently worth after taking this decrease into account is known as the Actual Cash Value (ACV).

After Doug’s accident, insurance declared that his car was “totaled,” the cost of repairing it was greater than its current value. Insurance offered to cover the car’s ACV, but this is where things got tricky for Doug: when he began leasing his car, it was a $40,000 vehicle. After a couple years, however, it is only worth about $30,000. Doug has been making monthly payments but still owes $35,000 on the lease. That is a $5,000 gap in what insurance says they will pay for the car’s value and what Doug still owes on the car. Doug is horrified to learn that not only can he no longer drive his car…he still has to pay for it!

If only Doug had known about Loan/Lease Gap Coverage.

Loan/Lease Gap Coverage can cover that “gap,” in Doug’s case, the $5,000 gap, so that people like Doug aren’t scrambling to pay a hefty amount out of pocket.

“If you only put a small amount down initially on your vehicle, if you have a long-term loan, or if you drive a lot and rack up miles, it would absolutely benefit you to add loan/lease gap coverage to your auto policy,” Leighton Bush advises.

Add Loan/Lease Gap Coverage today and save yourself from the pain of paying for a car that you can no longer drive.