If you’ve recently bought a new car, you know about lease gap insurance. Also known as loan gap insurance, this coverage is for your new car. Generally, the holder of the loan on your car – whether it is the dealership, the bank, or even your Uncle George – will want you to have this coverage. But what is it for and why do you need to have it? Where can you get the best car insurance rate that includes lease gap insurance?
What It Is
Lease gap insurance – or loan gap insurance – is coverage to protect the holder of the loan. The best car insurance rate companies usually offer it. Let’s take a look at why you would need to have lease gap insurance.
Peter bought a new car. It was spectacular – for him, anyway. Though it didn’t cost as much as the hot rod he wanted, it was perfectly acceptable for him to drive around in. He paid $5,000 out of his pocket – hard earned cash – and the bank gave him a loan for another $15,000. Yes, the car cost him $20,000. He loved his new car and got the best car insurance rate he could. It would cost him $300 a month to insure his new baby, but he knew it would be worth it. Peter drove around town fine, until one day, somebody cut him off in traffic and his new “baby” took the brunt of it. She was damaged. His insurance decided after careful consideration that his “baby” was totaled. Because the car was totaled, the best rate the car insurance company could give him was the value of it – totaled. But now, its value was only $10,000. Yep, it dropped in value significantly when he initially drove it off the lot. Now he owed more than it was worth – to the car insurance company, anyhow. But now, Peter has the $10,000 check and no car to drive. He can write that money over to the bank, but will they be happy? Not quite. He still owes them $5,000. For a car he doesn’t have anymore, and can’t drive anymore. Peter isn’t happy. This could have turned out differently if Peter had lease gap coverage. The lease gap coverage would have paid that $5,000 that Peter still owed the bank – and Peter would be finished with that car, forever.
Where To Get It?
Generally speaking, the dealership where you bought the car will offer you lease gap insurance. Of course, it will just be at an average car insurance rate – or higher. They want to be sure they’ll get their money if anything happens to your car before you’ve paid it off in full. You can get your lease gap insurance there, or, for the best car insurance rate, check with other car insurance companies when you get the rest of your coverage. It will be a much better price than through the dealership.
The foregoing article was written by the author based on experiences she has had. This article is not stated as a legal opinion or as fact but instead is stated as opinion of the author.