McKayla Girardin, Car Insurance Writer
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Loan/lease payoff coverage is a type of auto insurance that will help cover the difference between your car’s actual cash value and how much is still owed on a loan or lease. Loan/lease payoff coverage works similarly to gap insurance, but loan/lease payoff coverage has stricter limits on how much it will pay out.
Key Things to Know About Loan/Lease Payoff Coverage
- Loan/lease payoff coverage will typically only cover up to 25% of the car’s actual cash value, depending on your contract.
- Loan/lease payoff coverage may not cover any deductibles, negative equity from previous loans, extended warranty costs, or overdue loan or lease payments.
- You can only use loan/lease coverage if your car is declared a total loss.
- You are usually required to have a full coverage policy before you can get loan/lease payoff coverage.
- Loan/lease payoff coverage may be available for used cars, depending on your provider.
- Loan/lease payoff coverage can be more difficult to find than gap insurance, which can usually be purchased from car manufacturers, lenders, lessors, and car insurance companies.
Where to Buy Loan/Lease Payoff Coverage
If you are worried about owing more than your car is worth, loan/lease payoff coverage and gap insurance are both easy and inexpensive ways to keep your finances safe. To learn more, check out WalletHub’s guide to gap insurance.
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