WalletHub, Financial Company
Gap insurance covers the difference between your auto loan and the car's depreciated value. In other words, gap insurance helps you pay off your auto loan or lease if you're no longer able to drive your car due to it being totaled or stolen.
It’s important to note that gap insurance only pays when your car is totaled or stolen, so you cannot file a gap claim if you simply can’t make your loan or lease payments. Additionally, most gap insurance policies will not pay your collision or comprehensive deductible, if applicable.
Loan/Lease Payoff Insurance: Gap Insurance Alternative
Not all insurance companies offer gap insurance, but some offer loan/lease payoff insurance as an alternative. Loan/lease coverage is similar to gap insurance, except that it usually only pays up to 25% of the vehicle’s actual cash value toward the policyholder’s loan or lease balance, which might not be enough to cover the full amount owed.
If you’re curious about gap insurance or loan/lease coverage, you should check with your insurance company to see if they offer either.
To learn more, check out WalletHub’s guide to gap insurance.
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