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Loan / Lease Payoff Coverage: Giving You a Hand

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Loan / Lease Payoff Coverage refers to a kind of insurance that is designed to pay the difference existing between what the insurance pays in case your car is damaged without possibilities of being repaired or stolen and not recovered, and what you owe on the loan of it. This is why it is also called “gap” coverage. In the particular case that the car is stolen and not recovered, this coverage is subject to specific conditions and terms. In addition, it provides you with coverage for the time your policy is also valid.

In order to decide whether you need a loan / lease payoff coverage, you should contrast what you still have to pay for your car and the real value of the vehicle. In case that you realize that you owe more than the actual value of the car, then, the insurance is not going to cover the difference if it is declared a total loss. Moreover, you must rely on some basic requirement in order to be able to ask for a loan/lease payoff coverage for those cars you finance or lease. First of all, your lease or loan has to be issued by a financial institution. If you are dealing with an individual one, this may not apply for you. Also, you have to have Comprehensive and Collision coverage to be eligible.

It is also fundamental for you to know that the actual premium may vary depending on the sort of vehicle that you would like to have insurance for. Normally, insurance companies do not typically pay a higher amount than the actual cash value of a car. If still what you owe is much more than its cash value, loan / lease payoff coverage will protect the difference. Where loan / lease payoff coverage is purchased, then you will receive, three years after the moment when the purchase was made, a notice telling you that you may not need the coverage anymore, and you can drop it from your policy.

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