Is There A Gap In Your Car Insurance?
One of the most exciting moments in life is purchasing that brand new vehicle you’ve had your heart set on, and the smile on your face after realizing your hard work has paid off. Purchasing a new car can be incredibly exciting; you make up any excuse possible to have the opportunity to drive it whether it’s a quick trip to the grocery store to get bread, or a leisurely drive around the block. However, purchasing a new car comes with its own set of responsibilities, and you need to be cautious to retain the feeling for longer.
When you purchase a new car, there are tons of things you need to take care of such as the insurance, cleaning, maintenance, etc. Let’s stick with insurance for now, as that is the most important factor. Auto insurance plays an integral part in protecting your investment from any unforeseen circumstances that could arise.
A new car is a substantial investment, one that you surely want to protect. As we all are aware, there is always a risk of being involved in an accident. Even if the accident is not your fault, you could find your vehicle damaged in a hit and run, in which case you would need to rely on your own insurance to cover those damages.
With that being said, there are multiple insurance options available for new vehicles and you absolutely need to be sure about the coverage limits and what they entail for your vehicle. Often, new car owners are unsure about the various rules and regulations placed by insurance companies, which can often be troublesome during claims processing. Therefore, as a responsible car owner, it is always recommended to learn about the different coverage plans and understand the impact that these coverages will have in the event of a claim.
Many car owners purchase their vehicles with the assistance of financing from a financial institution or directly from the dealership they are purchasing from. However, there is a catch – bank loans charge you compound interest calculated monthly, which means that you end up paying more than the purchase price of the vehicle in the event you’re paying a high interest rate, or have not put a down payment towards the vehicle.
Problems start to arise when the vehicle is involved in an accident as a total loss. Standard insurance policies only cover the vehicle replacement value at the time off loss, which means that in most cases you would be out the difference from your purchase price. This is what frustrates most policy holders; they end up paying out of pocket for the difference between the purchase price and the resale value at the time of loss.
This is where having an insurance policy with specific coverage come into effect. For people who might suffer such grave consequences as a total loss accident, there are options available to safeguard and protect against your investment. Here are two viable options to protect reduce your financial burden in the event of a total loss:
Gap insurance is typically provided at an added cost through the financing company that holds the loan on your new vehicle at the owner’s request while obtaining financial approval for the loan. If you have purchased Gap Insurance for your vehicle and your new car is totaled, your financial institution will cover the difference between the remaining loan value and the resale value at the time of loss. This is where Gap Insurance is specifically designed to relieve car owners from the debt burden incurred in a total loss. This is beneficial in the cases where the loan value is worth more than the vehicle itself; whether it’s upgrading to a new vehicle mid way through your previous vehicles loan amortization period, or if paying high interest rates resulting in the loan amount being greater than the full purchase price of the vehicle.
Another option available for new car owners obtaining auto insurance for the vehicle is the OPCF 43 endorsement. This can be added to an existing insurance policy when purchasing a new vehicle with no previous registration with the vehicle being marked as new. This optional insurance coverage will protect the full purchase price, including taxes on your vehicle for up to 5 years depending on your insurance company. While the insurance is not highly beneficial in the event your loan value is worth more than the purchase price in the first year, it is very beneficial once the loan is lower than the purchase price.
For more information on coverages available to you, contact us today.