Gap insurance is a type of financial protection offered by the lessor or a third party that protects lessees in the event that their car is lost, stolen, or totaled.
Gap insurance is necessary because there is, in most cases, a gap between the market value of a leased car and its payoff amount, which is set by the lessor. Without gap insurance, if a lessee’s vehicle is ever lost, stolen, or destroyed, he or she would be responsible for paying the difference between the vehicle’s market value and the payoff amount.
Not having gap insurance can be a costly decision. It is highly recommended for anyone who plans on leasing a car.