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.

Right now I’m purchasing a car through a finance company. At what point am I able to get rid of the comprehensive and collision car insurance coverage and take it down to the minimum personal injury and property damage liability?

Isabel

That’s a good question, Isabel.

It really depends on what it says in your vehicles contract. For most vehicles, and probably all vehicles, which are purchased with the add of a financing institution such as the car dealer ship or a bank, extra coverage for comprehensive and collision, and sometimes gap coverage, is required until you have finished paying of your loan from the financial institution and they no longer have the risk of you ending your payments with them when the car has not been entirely bought. There are some dealer ships and banks that are more strict about this than others, but for the most part the best idea is for you to understand what your contract says and, if you have any questions, for you to just call up your dealer ship or where you got the loan from and ask what the policy is in regards to dropping your car insurance coverage for your new vehicle.

For the most part, though, in order for you to get rid of your extra required coverage on your vehicle, what you must first have is the pink slip noting that you have paid your new vehicle off completely, and a title in your hand allowing that you are the sole owner (unless you have a co signer, of course) of the vehicle in question. If you don’t have this, then you are in essentially a joint agreement between yourself and the financial institution that financed your purchase of the car. What’s yours is theirs and what’s theirs is theirs. If you decide to drop youtr coverage before the time comes up, they could either be surprisingly nice, or they could assert their ownership and repossess this car. Most financial institutions will try to get you to get insurance on your own first, because it is a lot more beneficial to them if you keep making payments on your car than it is if they have to sell it for a very depreciated price, so you probably wouldn’t have it repossessed right away.

Consider that it is not only in your vehicle insurance company’s interest, or in the financial institution financing your car’s interest that you have insurance on your new vehicle, but also in yours. It protects your health, your vehicles, and most importantly, your finances and credit report. While it’s good to have liability for the case of you causing an accident, the same important must be put on the other cove rages, because you can be in just as big a problem for having no insurance on a vehicle that you still haven’t paid off.

If you really are having a hard time trying to pay your car insurance coverage premium, then you should try alternative ways of making your bill smaller. You can try raising your deductible and asking for discounts, as well as getting instant online car insurance quotes from different companies.

Cheers,

Fashun Guadarrama.