If you lease or carry an auto loan and your vehicle is deemed unsalvageable or "totaled" following an accident, your auto insurance has you covered -- almost.
When a total loss is claimed, the settlement folks typically calculate your payout based on the market value of the vehicle at the time of the crash.
Because lease holders and borrowers tend to be "upside-down" for much of the term of their auto lease or loan, meaning they owe more than the vehicle is worth, that can leave them on the hook for the gap, or the difference between the market value and the remaining balance they owe. That gap can often be several thousand dollars on a totaled car.
Most dealerships and many auto insurance companies offer loan-lease gap coverage against this costly scenario.
"When you are looking to purchase or lease a vehicle, you really need to keep that in mind," says Wilson. "Normally, it is not a separate policy; it can be added onto the auto policy itself."