Are you financing your vehicle? Then you may want to consider gap insurance coverage! The depreciation of a car is steep as soon as you drive it off the lot, then levels off over time. If take out a loan, you could owe a lot more than the vehicle is worth for several years! This can be an issue if your vehicle is totaled while you are still “upside-down” on the loan. The coverage your auto policy provides is based on the current worth of your car, not your loan amount, how much you initially paid, or what a new version is worth. In the event of a total loss, you’ll only get what the car is actually worth.
For example, say you purchase a car and get a $20,000 loan to finance it. Then you are in an accident, and your car is declared a total loss with a worth of $15,000. However, your loan doesn’t disappear just because the car is gone and you still owe the remaining $5,000. This is when gap insurance coverage comes into play! This type of policy covers the difference between how much your car is worth and what you still owe on the loan. Otherwise, you are left to pay the difference out of pocket… Click here for some tips on how to minimize distracted driving to help you avoid needing to use your gap insurance coverage!