Leased Car

What you need to know about leasing a vehicle: Gap Insurance

Do you drive a leased vehicle?  If so, you may require “Guaranteed Auto Protection” (GAP) insurance. When you lease a new vehicle, you schedule payments to the finance company in order to pay off the total value of the vehicle over a specified time-frame. However, the moment you drive the car off the dealer lot, the vehicle will depreciate in value. This can have serious implications if you are in an accident in a leased vehicle.

Leased Vehicle

If you are in an accident, your auto insurance will only pay for the current market value of the car. This amount is typically less than the total amount you owe the finance company. This means there is a “gap” in your insurance coverage.

In this case, you would be required to pay the finance company the difference between the car’s actual market value and the remaining value on the leased vehicle. This amount can be thousands more than what would be covered under a standard auto insurance policy. In fact, with some lease agreements, you are required to make all payments even if the vehicle is written-off. For instance, if you purchase a vehicle on a 4 year lease and you crash in the first year, you would still have 36 outstanding payments on the vehicle.

In order to protect yourself against this outcome, it is important to make sure there is a GAP insurance policy in place. GAP insurance would act to take care of the outstanding balance owed to the finance company after your loss has been settled. This would provide peace of mind, as you would no longer be on the hook for outstanding payments in the event of an accident.

It is important to remember that not all lease documents are the same. Lease documents need to be read carefully in order to understand what you would owe in the event of an accident. If your lease agreement does not include a GAP clause, be sure to contact your insurance broker to set up the coverage you require. provides a suite of insurance products that help you protect the value of your vehicle including replacement cost, limited depreciation, post-crash guarantee and OEM parts. Contact a broker in your area to get a quote.

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