Gap insurance (also called loan/lease payoff) applies if your car is totaled or stolen. You should consider adding this coverage if the amount left on your loan is more than your car is worth. For example, you have $25,000 on your loan and your car is only worth $20,000. This coverage will help pay off the balance of your loan—the $5,000 gap—minus your deductible.
How does gap insurance work?
Gap insurance protects you from depreciation. Sometimes, your car can depreciate (meaning its value drops) significantly the second you buy it. For example: A $30,000 car could drop to $27,000 when you drive it off the lot. That then leaves a "gap" between your loan amount and your car's value. If it's totaled, Progressive will pay off that gap (minus your deductible)—up to 25% over your car's value.
Example: You finance $30,000 for a new car. You've had it for a few years and have been making all of your payments. It's now worth $20,000 and you owe $25,000 on your loan. That's your $5,000 gap. If you total it, we'll pay you $25,000 (minus your deductible). Without gap insurance, you'd only get $20,000 (minus your deductible).
Keep in mind, you must have comprehensive and collision coverage on your policy to qualify for gap insurance.
Have more questions about insurance? Call or email us today! We are happy to help.