Car Leasing Glossary - GAP Coverage

GAP Coverage (car leasing term)

A type of insurance coverage that covers the difference between the payoff of the lease and the amount covered by other insurance coverage, when a vehicle is damaged or stolen during the term of the lease. Most gap coverage requires that the lessee not be in default under the terms of the lease.

A plan that provides you financial protection in case your leased vehicle default at the time of the loss. There are two types of gap coverage. One is a waiver by the lessor (define: lessor) or assignee (define: assignee) of the gap amount if the vehicle is stolen or totaled. The other is a contract by a third party to cover the gap amount. Under either type, you may remain responsible for the insurance deductible, for other amounts deducted from the insured amount of the vehicle by your insurance company, and for any past-due or other amounts you owe under the lease. You may also be responsible for your monthly payments (define: base monthly payments) until the lessor receives your insurance proceeds.  

Car Leasing GAP Insurance