What is Loan Lease Gap Insurance? Loan/Lease Gap Coverage pays the difference between the unpaid amount due on the new or used loan or lease agreement and the actual cash value of the auto in the event of a covered total loss of the auto.
How does loan lease gap work? As many of you know, your new car depreciates as soon as you drive it off of the lot whether it be a new or use car or truck. You take out a $10,000 loan on your new to you, car. Lets say a short time later you get in an accident and total the car you just purchased. You have yet to make the first payment. You turn the claim into your insurance company and they offer you $9000 for the car you just took out a $10,000 loan. With loan lease gap insurance your insurance company will pay off the “gap” between what you owe and the actual cash value of the vehicle.
My bank and insurance company both offered me loan lease gap coverage. Which is better?
Car Insurance Company – There are many benefits of purchasing through your car insurance company. First reason being is the ease of filing a claim for the loan lease gap coverage. You are just dealing with one insurance company instead of two insurance companies. When filing a claim through your bank’s gap insurance company, you will have to report claim with that carrier and then provide all of your primary car insurance company’s claim reports and info to the bank’s gap insurance company. A second benefit is the cost of purchasing through your car insurance provider. It’s hard to beat $16 a year for loan lease gap coverage. A disadvantage is that your car insurance coverage typically limits the amount of coverage they will pay to typically 125% of your Car’s actual cash value.
Bank – When purchasing your car, you most likely will be offered loan lease gap coverage through your salesman. As stated above, loan lease gap coverage doesn’t typically have a “cap” when purchasing through your finance company. However, you do pay a lot more for that coverage than you would through your car insurance company. The average annual rate through your bank is typically $100 a year. One advantage is that it is combined with your car loan payment.
So what do I recommend? Unless you are way in the red on your new car, then I would recommend purchasing the loan lease gap insurance from your car insurance carrier for two reasons: First, due to how easy and smooth the claims process is and the secondly, it is rather inexpensive at $16 a year when compared to what you purchase through your lender for $100 a year.
Jason D. Brown, CIC is a trusted and experienced, Certified Insurance Counselor, that has been working with Donahue-Stangle-Brown Insurance Agency since 1995. Donahue-Stangle-Brown Insurance Agency is an independent insurance agency that represents the top insurance companies here in Ohio since 1948. Let us do your insurance shopping for you with our multiple insurance companies. We offer a wide range from car insurance, home insurance, business insurance, business auto insurance, life insurance and farm insurance. Please contact one of our professionals today at 740-998-5544 in Frankfort or 937-981-2272 in Greenfield. You are also welcome to contact us via EMAIL.