We’ve gotten questions multiple times in the past few months about gap coverage. Auto dealers are selling it on leases and finance deals. Naturally, some of our clients are reaching out to us when it’s presented and asking us if they should be buying this insurance coverage from the dealer.
The answer is almost always a BIG, FAT, NO!
First of all, what is loan lease gap coverage? One of our insurance companies sums it up this way.
Loan/lease gap coverage pays the difference between the actual cash value of your vehicle and the unpaid balance on your loan or lease if your vehicle is totaled due to a loss covered by your comprehensive or collision insurance. For instance, if your car is worth $10,000 at the time it gets totaled in a covered incident, but you still owe $15,000 on your loan or lease, loan/lease gap coverage will pay off the remaining $5,000 so you don’t have to settle the balance out of pocket.
The dealers are adding this coverage for hundreds, sometimes thousands of dollars over the life of your lease or loan. Every time we’ve looked at it for our customers, we’ve found that we were able to provide loan/lease gap coverage for far less on their auto insurance policy with one of our carriers.
It makes sense, right? Wouldn’t the insurance experts at insurance carriers that are covering physical damage and liability for your vehicle be able to underwrite this better and more efficiently? Wouldn’t the company that already insures your vehicle be willing to add it onto an existing policy for less?
You don’t get medical advice from your grocer.
You don’t buy cars from your insurance agent.
So, why would you try to buy insurance from your auto dealer?
You almost definitely should not.