Pop Quiz: When insuring a new vehicle, does the insurance company insure what the vehicle is worth or how much the person owes on the vehicle loan?
Not everyone associates their vehicle loan with their vehicle insurance. Have you heard of loan/lease payoff coverage? Some companies may call it ‘gap’ coverage. This coverage is intended to help pay for a portion or possibly the entire difference between what you owe on a vehicle loan and what the vehicle is actually worth at the time of a covered loss. Surprisingly, this is usually a fairly inexpensive coverage that can be added to your policy when you carry comprehensive and collision coverage on the particular vehicle.
Here’s a good example: One of our customers in the Lake Martin area had purchased a new vehicle a few years back. They opted to take the loan/lease payoff coverage, and thankfully so. During a period of heavy rain, a flash flood occurred and totaled their new vehicle. After being examined by the adjuster, it appeared their vehicle was worth about $3,700 less than what they had left to pay off on their loan. But, with their loan/lease payoff coverage, the insurance company was able to cover that additional amount so that our insured did not have to take that money out of their pocket. So when taking out a loan or a lease on a vehicle, hopefully you will consider this coverage and decide to ask your agent about it.