What is Lease Gap Insurance?
Many folks get their dream car through a lease. Now, assuming the worst happens and your car is totaled, you might suddenly find yourself in a precarious situation where your “fair market value” insurance payout falls short of the outstanding lease you owe on the car! Scary, isn’t it? That is exactly what the Lease Gap Insurance protects you against.
How does Lease GAP insurance work?
Lease GAP insurance was introduced in the 1980s to save buyers this heartache. There are a few things you need to know about lease GAP insurance. First, if you got a brand new BMW 128 Convertible or an Infiniti on lease of between $34,000 and $38,000, for example, you probably took out a lease or loan of about $45,000 to cover all the essentials. Then you definitely need a BMW lease gap insurance or an Infiniti lease gap insurance that will protect your investment should your car be totalled. Such lease GAP insurance will pay for the difference between the actual value and the fair market value calculated by the regular insurers of your car.
Who Needs Lease Gap Insurance?
Another feature of lease GAP insurance sounds rather obvious but is worthy to note. Many folks view a lease GAP insurance as a rip-off and as an extra burden or hurdle in their way to owning their dream car. Looking at the example of BMW and Infiniti again, you pay a substantial sum for the cars only to pay more for a BMW lease gap insurance or an Infiniti lease gap insurance. The simple fact is that lease GAP insurance only applies to you if you intend to get your dream car through a lease. If this is not your goal, BMW lease gap insurance or Infiniti lease gap insurance are not necessary.
What If you pay Cash?
- Consider these three facts:
- You should not expect a 100% pay out from your insurers in the event of a claim.
- You’ll get just a little over $20,000 for the BM you leased for $34,000.
- Lease GAP insurance covers this difference.
The difference in value is enormous and, should the worst happen through theft or accident, you could find yourself in a deep financial mess. It is better to be safe, then sorry.
Remember it’s a short-term Policy
Like any other form of insurance, this class of insurance is only effective within the period covered by your terms of contract. You must remember that it is a short-term insurance. After the date of expiration, you will be liable for the difference if there is an accident.
Lease GAP insurance offers you the peace of mind so that, should the worst happen, you won’t have to grapple with the painful loss of your dream car as well as gather up the financial difference between the actual and the fair market values.