Did you know that most commercial auto insurance policies do not provide physical damage coverage on a replacement cost basis? Instead, coverage is typically provided on an actual cash value basis (adjustment for depreciation and condition of the vehicle) at the time of loss. Because the value of a vehicle begins to depreciate soon after the purchase date, you might be in the position of still owing out-of-pocket on the lease or loan, even after the insurer has made a total loss settlement.
One way to avoid this unpleasant circumstance is to purchase Auto Loan/Lease Gap Coverage for the vehicle. This coverage will pay for any unpaid amount due on the lease or loan for a covered auto in the event of a total loss. Most carriers, like Tokio Marine, offer this coverage for a reasonable premium charge.
So, be sure to consider including Auto Loan/Lease Gap Coverage when purchasing a new commercial auto policy or adding a vehicle to an existing policy. If you have any questions about this type of coverage, feel free to give us a call!