Drivers in Hershey, PA, are obligated to carry certain auto insurance liability coverages as prescribed by state law. Moreover, when you finance or lease a vehicle, lenders may dictate their own coverage prerequisites. Gap coverage is a common type of insurance required by lenders.

What is Gap Coverage?

"Gap" is an acronym for "guaranteed asset protection," a term that aptly describes the function of this coverage. Gap coverage serves to bridge the financial discrepancy between your comprehensive or collision coverage and the remaining liability on your loan or lease. Essentially, it ensures that the asset used as collateral, your vehicle, is financially protected against damage.

If you have any questions about gap coverage, our agents at Options Insurance Agency would be happy to explain it in more detail.

When Do You Need Gap Coverage?

Gap coverage is typically mandated when a vehicle is financed or leased. The absence of such coverage can result in a financial gap, for which you might be liable if the vehicle is totaled. Comprehensive and collision coverages offer protection against vehicle damage but generally only insure up to your vehicle’s fair market value. This can be less than your loan balance as vehicles typically depreciate significantly faster than auto loans are paid off. A similar scenario may arise if your leased vehicle is totaled; you could be held fully financially responsible for the damaged vehicle.

Without gap coverage, you may find yourself financially underwater on a loan or lease. You could still owe on your loan or lease but no longer possess a functioning vehicle, which poses a problem for both the driver and the lender.

How to Get Gap Coverage

If you’re financing or leasing a vehicle, ensure you have gap coverage in place to protect yourself against potential financial risks. We at Options Insurance Agency are here to help you set up this protection. We’ve assisted many Hershey, PA drivers in finding the right auto insurance, and we’re ready to guide you as well.