Do You Need Gap Insurance When Buying A New Car?
Reader question:
If I have to get a new car as a result of a car insurance accident, does my gap new car insurance coverage take care of the down payment for my new vehicle?
Britney
No, it does not, Britney.
Unfortunately, there is a reason why you have to be way more careful when you own a new car, and that is because even with gap new car insurance you will be entirely responsible for getting yourself a new vehicle. The reason for this is that gap insurance has one purpose only, and that is to create a bridge between what your car is worth and what you owe. For example, the car that I am purchasing right now is worth fifteen thousand dollars, but I still owe eighteen thousand dollars on it. This is called an upside down loan, and it means that you owe more for a car than it is actually worth. This happens a lot with new cars, which are worth a lot straight off the assembly line but depreciate rapidly.
If I had gap insurance (and I do), then if I got into a car insurance accident I would not have to worry about continuing to pay on a car that I know longer have. My collision coverage will give me the fifteen thousand dollars that my car is worth, and then the gap coverage will provide the other three thousand. However, at the end of all this, while I would be safe from debt, I would still be stuck paying for a new car. I would no longer owe anything on my old car, but the gap insurance does not worry about that, it only worries about bridging the gap between what you owe and what your car insurance coverage is actually worth.
Cheers,
Fashun Guadarrama.
Should My Car Insurance Pay for a Dent From a Parking Lot?
Reader question:
I went grocery shopping the other day and and when I came out of the store, there was a big dent in the back of my car that hadn’t been there before. Of course, no note at all. What part of my car insurance coverage takes care or this type of damage?
Juan
Thank you for asking, Juan.
In your case, you are going to want to make a car insurance claim using your collision coverage. Collision coverage is most often known to apply to any vehicle that has gotten into an at fault accident, where liability of the other driver does not extend to their vehicle. Car insurance coverage for this type of damage could also fall under comprehensive, but in a different situation.
You might wonder why it is that collision coverage is needed if you can’t be sure that another vehicle was involved. You also might wonder why it is that whoever caused the dent does not have to pay with their auto insurance liability coverage. Both are valid questions, and to the first one I’d say that there isn’t much rhyme or reason to it, it’s just the way the auto insurance business works. As to the second one, you could do that if you know who the driver is. If you see the driver run into your car and cause the dent, or if they leave contact information on your car so that you can make a claim with their auto insurance company, then you don’t have to make a car insurance claim with your own company at all.
Also, not in every situation would a dent be covered under collision coverage. If the cause of the dent was, say, a shopping basket colliding into the back of the car, and you saw this and didn’t just guess it, or someone else saw it, then so long as you didn’t know the person who did it you could make a claim under your comprehensive coverage, because that is what would apply.
Now, one more question that might be remaining is, would your auto insurance rates go up for a dent that you claimed for under collision coverage, since collision coverage is usually used when you get into an at fault accident? Ninety nine percent of the time it would not, because most car insurance companies do not go by what type of coverage you filed the claim under, but instead by who caused the accident. It is obvious in this situation that you did not. Some car insurance companies are very draconian, though, and your rates would indeed go up so long as your state allowed it. However, in many cases it would not be necessary to even file a claim because if you have a higher deductible you can usually fix a dent in a car for much less than the deductible. If you want to stay on good terms with your auto insurance company, though, you should at least advise them of the incident.
Cheers,
Fashun Guadarrama.
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