|Question: I'm considering leasing a car. Is there any special insurance I need?|
Along with your regular automobile insurance, you should consider purchasing guaranteed auto protection (GAP) insurance for your leased car. GAP insurance pays the difference between what you owe on your lease or auto loan and what your insurance pays if your vehicle is damaged beyond repair (totaled) or stolen.
Why is this important? If your vehicle is totaled or stolen, your auto insurance policy will pay only the actual cash value (ACV) of your vehicle. That's the depreciated value of your car. The ACV may be substantially less than what you owe on your loan or lease. You must make up the difference out of pocket unless you have GAP insurance.
GAP insurance can provide valuable protection during the early years of your car, when it depreciates the fastest. GAP insurance may also be required by some lenders or lessors. However, once the outstanding balance on your lease or loan drops below the value of your car, you'll no longer need GAP coverage. At that point, you should cancel your GAP policy.
The cost of GAP insurance will vary from one insurer to another, so it pays to shop around. The cost will also depend on the type of car you buy or lease, and its value.