What it does
Physical damage coverage pays the actual cash value of a totaled auto (less the deductible), not what the business still owes the lender or lessor. On new or heavily financed vehicles, especially leases, the balance due can exceed actual cash value. CA 20 71, as its title says, provides auto loan/lease gap coverage for covered autos so the business is not left paying off a vehicle it no longer has. The current multistate edition is 11 20.
Who needs it
Companies with leased fleets or recently financed vehicles: contractors with new pickups, service fleets on closed-end leases, start-ups with little equity in their vehicles.
Key points
- It only works with physical damage on the vehicle; it does not replace comprehensive or collision.
- Read the endorsement for which parts of the outstanding balance it will and will not pay.
- Check whether the lease or loan already includes gap protection before buying it twice.
Quoting notes
Ask which vehicles are financed or leased, the lender or lessor, and payoff amounts versus market values. Lessors will also want CA 20 01, and lenders a loss payee clause such as CA 99 44.
