“36. Early Termination Because of Total Loss.
a. If you suffer a total loss of the Vehicle, you are in Default, the Lease terminates and you are obligated to notify the insurer of the Vehicle and to coordinate with the insurer of the Vehicle to ensure payment by the insurer of the Vehicle on the claim to us. If you have complied with all over provisions of this Lease, and the Vehicle is declared a total loss by the insurer of the Vehicle, you will owe us nothing more once we have received (1) all amounts due under the Lease as of the date of total loss of the Vehicle, (2) an amount from you equal to the amount of your deductible and any other subtractions from the actual cash value under the insurance policy covering the Vehicle, and (3) insurance proceeds from the insurance policy required under the Lease or the equivalent amount of the value of the Vehicle. If the Vehicle is a total loss and the requirements of this Section 36(a) are not satisfied, you will owe the Standard Early Termination Charge, Less the Turn-in Fee”
Now I’m one that encourages gap coverage when appropriate, and I do tell folks to ask their agent for it, because generally it is much cheaper from your agent than a dealer (even at my cost). I do question if gap from your insurance enters into the equation over whether the vehicle is a total loss or not, since they are on the hook for more, but that’s just speculation on my part. But, this lease contract effectively says you owe your insurance deductible, so long as you’re caught up on your payments. Nothing about equity, remaining payments, residual values or anything else. The lease is terminated. I’ve worked with several brands, and such a clause has always been included, not to say that it is on every brand. It’s important to have the right level of insurance, but over insurance is tossing money out the window.
The insurance agent was basically being the slimy finance person. She insisted I was trying to pad my figures, when I was showing her that the coverage is not needed, nor was I making it part of a package, it’s just part of the standard lease agreement. If you google the topic, you’ll get a bunch of insurance companies talking about the value of it… only a few seem to mention that some agreements effectively negate the need.
As a capitalist, everyone is trying to make a buck, and there is nothing wrong with that. Just make sure they’re earning a buck, not just taking it. Her closing comment to me was she’s been doing her job since 2002, and in my mind I couldn’t help but think she’s just been drinking the kool-aid for 22 years. So I encouraged her to look into it further. And as always, if you think car dealers make too much, feel free to invest in any of the publicly traded ones.