Gap Insurance and Automobile Coverage
When you have a loan or lease on your car and the car is totaled, often the market value of the vehicle is less than the money you owe the bank. This means you are “underwater” and have to pay money out of your pocket to pay off the loan or lease – something that is generally undesirable for most consumers, since they also have to come up with a down payment for a new car. To mitigate this problem, car dealers and most auto insurers offer something called “gap insurance.” Gap insurance is coverage to provide the funds necessary to pay of the loan.
On an auto insurance policy this is generally very inexpensive coverage, as low as $15 per year. Ask your agent if this can be added to give you more complete coverage on your late model cars when you are utilizing leasing or financing.