If you finance or lease your vehicle and it gets totaled, loan or lease gap coverage can cover the difference between the current value of your vehicle and what is owed on it.
How gap coverage works
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A white umbrella logo and text on a red background. What is loan or lease gap coverage? A person types the phrase into a search bar and clicks the Search button.
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Loan or lease gap coverage. You might have heard of it, but what is it?
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Picture this, you pick out a new car and finance it with a loan.
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One day when you're driving to work, you get into an accident and the car is totaled.
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Generally, loan or lease gap coverage can help cover the difference between the actual cash value of your vehicle at the time of the accident and the unpaid balance of your loan or lease.
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That's where the gap part comes in.
Here's a quick illustration. Suppose that at the time of the accident your car loan balance is $20,000, and the actual cash value of your car is $17,000.
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The car drives. A check mark in a shield. A hand gives a dollar to another.
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Loan or lease gap coverage may protect you from having to pay the remaining $3,000 balance of your loan, subject to certain exclusions.
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For more information, go to travelers.com.
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Travelers red umbrella logo. Text, The information in this video is general in nature. Any description of coverage is necessarily simplified. Whether a particular loss is covered depends on the specific facts and the provisions, exclusions, and limits of the actual policy. Nothing in this video alters the terms or conditions of any of our policies. You should read the policy for a complete description of coverage. Coverage options, limits discounts and deductibles are subject to state availability and to individuals meeting our underwriting criteria. Not all features available in all states. Insurance is underwritten by The Travelers Indemnity Company and its property causality affiliates, One Tower Square, Hartford CT. In TX, Automobile insurance is offered by Travelers Texas MGA, Inc. and underwritten by Consumer County Mutual Company (CCM). CCM is not a Travelers Company. In CA: Auto Insurance is underwritten by Travelers Commercial Insurance Company, Certificate of Authority #6519; State of Domicile: CT and Travelers Property Casualty Insurance Company, Certificate of Authority #6521; State of Domicile: CT. In WA: Automobile Insurance is underwritten by The Standard Fire Insurance Company. Underwriting companies in CA and WA are located at One Tower Square, Hartford, CT 06183. Connecticut. Copyright 2022 The Travelers Indemnity Company. All rights reserved. Travelers and the Travelers Umbrella logo are registered trademark of The Indemnity Company in the U.S and other countries.
What does loan or lease gap coverage cover?
The value of a vehicle depreciates the minute you drive it off the lot. If you are financing or leasing your vehicle and it gets totaled in an accident, you may owe more than the vehicle is worth (which is the maximum amount you can recoup from basic auto coverage).
Loan or lease gap coverage pays the difference, or “gap,” 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 example, 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 or lease gap coverage will pay off the remaining $5,000 so you don't have to settle the balance out of pocket.
Loan or lease gap coverage does not cover carryover balances, lease penalties, overdue payments or extended warranties. Also, you must be the original owner of the financed or leased vehicle, and the car must be purchased from a new car dealer (not a previous owner) to be eligible for this coverage.
