Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Here's what you need to know...

  • Gap insurance helps to cover the gap between the value of your vehicle and what is still owed to the lender for it
  • If you lease a vehicle, gap coverage may be required by the lender. It is also a good coverage to consider, especially if the vehicle depreciates very quickly
  • Shopping around for different quotes can get you a much better rate instead of just accepting whatever the car dealer has to offer for gap insurance
  • You also want to make sure that gap coverage is not already included in the monthly payments that you are making for your leased car so that you do not pay twice

Gap coverage essentially helps you to pay for the gap between what you would still owe on a car or truck and the amount that you receive for its value in an auto insurance claim.

What gap insurance tries to take into account is the rate of depreciation of a vehicle’s value since you signed a lease or a loan for a car.

One of the reasons that car dealers require gap coverage on leased vehicles is that if you are very early on in the lease agreement, it is highly likely that you could end up owing much more than the leased car’s value if there was a total loss at that point during the lease term.

This is because what you owe for your car in terms of the monthly payment includes many ancillary costs, especially at the very beginning of your loan.

Because some lenders require gap insurance in order for you to complete the lease agreement, they may simply roll the gap coverage into the cost of your monthly lease payments.

You need to be sure that you keep a copy of the lease agreement and ask the lender if you are already paying for gap coverage through your monthly lease payments.

If you are, then there is absolutely no reason for you to pay for this duplicate coverage through your own auto insurance company.

One other thing to watch out for is that not all car dealers will specifically use the term “gap coverage.” They may describe this coverage using different words, but it means the same thing.

This is why you must read the lease agreement very carefully and ask questions about anything that you do not understand. If not, you could end up paying again for something that you have already rolled into your monthly payments under your lease.

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Finding the Right Gap Coverage


When you go to sign the lease agreement for a car, you may be offered a gap insurance policy directly from the car dealer. While it is ok to purchase gap coverage from the dealer, you may be paying more for it than you would from a typical auto insurance company.

Just like with any other type of insurance coverage, it is a good idea to shop around for different quotes on the best rates for gap coverage.

If you know in advance that you are leasing a car, it may be best to do this before you show up at the car dealer to sign the lease because many dealers will not let you leave the lot with the car until you can provide proof of gap coverage.

If you do not shop around for different quotes on gap coverage ahead of time, you may feel pressured into buying the coverage directly from the dealer.

Shopping around in advance also gives you a chance to ask your auto insurance company how your new leased car will affect your auto insurance rates, if at all.

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Don’t Pay for Coverage You Don’t Need


At a certain point in your lease, you will likely not have any gap that gap insurance would help to cover.

This is because as you continue to make lease payments towards the value of the car, what you owe on the remainder of your lease agreement will not exceed the value of the car.

The size of your gap in coverage and the rate at which it disappears depends on many factors, including:

  • the rate of depreciation of your car
  • what types of lease terms that you negotiated

You should pay attention to when you no longer have an actual gap in coverage. At this point, you should instruct your auto insurance company to cancel your gap coverage so that you are not paying for a type of insurance that you will not be able to use.

On your part, you will need to be watching carefully for the change in your car’s value and the total of the monthly payments you are making toward the value of the leased car.

In sum, if you end up leasing a car from a car dealer, they will likely require that you have gap coverage on the leased vehicle. While you can purchase it directly from some car dealers, you are probably better off shopping around to get the best possible deal on gap coverage.

This type of coverage will protect you for the difference between what you would receive for the value of your car in a car insurance claim and what is still owed on the lease or loan for your car.

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