Is additional car insurance necessary for my new vehicle?
Getting a new car is very great – from the new car smell to how it drives. You might be able to buy three important insurance coverages helping protect your new vehicle if it is accidentally ruined beyond repair. These coverages include repair provision coverage, coverage for new car replacement, and lease or loan gap protection coverage. That is why many car insurance companies pack these coverages in just one package. However, if you need this package for your new car and what the role of each coverage is? Check out here!
What Is Really “New” Car?
When it comes to new car, the definition may vary among insurers. To purchase extra coverage for your new car, you need to be the original owner of that car. In addition, some car insurance policies might specify that the vehicle not be older than 2-3 model years.
You had better also know that the new car coverage will typically expire as the car is no longer eligible. Besides, the coverage just applies to the new vehicle for which you have bought the coverage, not all vehicles on your policy.
Is Standard Car Insurance Enough?
Some specific coverages, such as comprehensive coverage and collision coverage, might help you cover the cost of repairs, reduce the deductible and up to the limits of your policy. If the vehicle is damaged totally, yet, your car insurance company may pay only what the vehicle is worth at that moment (also known as “actual cash value”).
This could be problematic as you possess a new vehicle. It is worth noting that new cars could depreciate in value about 20% in the first year, and standard car policies typically cover the real value of the vehicle, which will be less than the price of buying.
It means that if your new vehicle is totaled in the covered loss, the reimbursement check of insurance might not be adequate for you to buy another new vehicle. If you have a car loan, you will still be responsible for the remaining amount, no matter if you could still use the vehicle or not.
Important Coverages For New Vehicle
The coverages below might help protect you in terms finance if you have a new car which is totaled or needs main repair:
- New car replacement coverage: helps pay to replace a new vehicle which is totaled. Having this coverage, the car insurance policy you are carrying might let you replace the totaled car with a new vehicle of the same model, make and equipment, or it might specify if a similar car model or a certain amount of dollar will be available.
- Repair provision coverage: this might be useful in paying for the repairs to a damaged car or a replacement cost without deducting depreciation in its own value. However, remember that coverage limits do apply in this situation.
- Lease or loan GAP coverage: in fact, GAP coverage might help to pay for the disproportion between the amount owed on a car lease or loan and the actual cash value of the totaled vehicle. Even when your vehicle could no longer be used, the driver will be still responsible for the remaining lease or loan payments. If the reimbursement check from your car insurance company is inadequate to cover your owe, GAP coverage might help to pay for the left amount on a car lease or car loan – so you will not be trapped into paying for the vehicle which is currently put into the scrap yards.
Driving a new vehicle could be fun, yet having to replace it may come with unexpected expenses – particularly since the cost of a new car is over $32,000. So if you have a new vehicle, you might want to take advantage of new car replacement coverage, GAP coverage and repair provision coverage, or a 3-in-1 package.