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.
What Are The Different Types Of Car Insurance Coverage And Which Should I Have?
This car insurance commercial that I found on YouTube really cracks me up. It sort of embodies the confusion that most people feel when they are trying to hash out their car insurance policy with their company, and everything seems both repetitive and lost on them every time. I’m going to try to help make this feeling a little better by giving you a short guide to different types of car insurance coverage that you might need when you go to get your policy.
- Comprehensive.
Comprehensive coverage is often required if you are financing a vehicle, but is to required by law in any state. This covers any damage or loss of vehicle in the event of a natural disaster, such as a flood or fire, or in the case of theft or vandalism. These are basically accidents that do not involve driving.
- Collision.
This is another type of coverage that might be required by your financer. Collision covers the damages or total loss of your vehicle of you get into a car accident with somebody else and you are the at fault driver.
- Gap insurance.
Third in the financer trilogy, gap insurance picks up where all of your other coverages leave off. In order to get this type of coverage, you have to have the max limits on all of your other coverage. This could be a lot of help if you total a car that you’re still paying on, because the value is often less than what you still owe.
- Liability.
This is the basic car insurance coverage that is required by most states. Liability encompasses three types of coverage, for injury or death to one or more persons, and for property damage. It covers the other driver in the case of an accident in which you are at fault.
- Uninsured/underinsured motorist coverage.
When a driver causes an accident and does not have enough insurance, or any at all, to cover your damages, this type of car insurance coverage kicks in.
- Personal injury protection.
This is very popular in no fault states, and where it is not required might not be necessary if you have health and life insurance. It kicks in before the other driver’s liability does, and covers you if you are at fault. It handles medical expenses, wage loss, and death.
Cheers,
Fashun Guadarrama.
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