What is GAP coverage on a leased automobile?
A leasing company may require “gap” insurance. This refers to the situation where if you have an accident and your leased car is damaged beyond repair or “totaled,” there may be a difference between the amount that you still owe the auto dealer and the check you’ll get from your insurance company. That’s because the insurance company’s check is based on the car’s actual cash value which takes into account depreciation. The difference between the two amounts is known as the “gap.” On a leased car, the cost of gap insurance is generally rolled into the lease payments. You don’t actually buy a gap policy. Generally, the auto dealer buys a master policy from an insurance company to cover all the cars it leases and charges you for a “gap waiver.” This means that if your leased car is totaled, you won’t have to pay the dealer the gap amount. It is always wise to check with the auto dealer when leasing your car about their policies for “gap” coverage. If you have an auto loan rather than a le
