If you are like most people, you may purchase a wide range of insurance policies to protect you against financial loss, and you may rest peacefully at night with the belief that you have all of the coverage you need. However, there are many instances where individuals have been financially devastated by a worst-case scenario, and they have been shocked to learn that their coverage was woefully inadequate. Finding out that you do not have the right coverage in place after you file a claim can be a nightmarish situation, and this type of event can be avoided altogether if you explore your policies in greater detail. These are some of the most devastating events that commonly are not covered by standard insurance policies.
In some cases, mortgage lenders require property owners to purchase flood insurance. This is particularly common in coastal areas, along riverbanks and in other low-lying areas. However, if you do not have a mortgage loan in place or if your lender is not requiring it, you may consider opting out of this coverage to save money. Flood coverage can cost several hundred dollars each year, but keep in mind that a single flood can entirely wipe out your home. Generally, if there is any risk of flood on your property, you are better off purchasing flood insurance.
Being Upside Down on Your Car Loan
Being upside down on your car loan means that you owe more money on the car than it is worth. If you have a car accident or your car is stolen, you may be faced with a total loss situation, and you may expect your insurer to pay off the car loan entirely and even to provide you with extra money to use as a down payment on your new car. This is not how car insurance works, however. The insurer offers benefits up to the current market value of the car. This means that you will be required to pay off the remainder of the car loan even though you can no longer drive it. More than that, you also need to pay the insurance deductible and make a down payment on a new car. This can be financially challenging or even impossible for many people. Buying gap insurance and new car replacement coverage can help you to avoid this type of event.
Sewer lines can backup for a several common reasons in older and newer houses alike. Tree roots growing into the pipe as well as the settling of ground around the pipe can cause ruptures, and any type of debris can accumulate in the pipe to cause a clog. The result of a sewage backup issue is substantial plumbing, cleanup and home renovation costs. You likely also need to relocate your family to a hotel for a period of time until the work is completed. This type of even is not covered under a standard property insurance policy, but you can purchase a rider upon request.
Financial Loss If You Become Disabled
Both short-term and long-term or permanent disabilities can be hard on you financially as well. With many disabilities, there may be a period of time where you incur significant medical bills. During this time, you may also be unable to work. Some people find that they must switch professions entirely or that they are unable to earn a living at all after an accident. Disability insurance can be purchased to provide you with some compensation for medical expenses, loss of income and more.
When you think about earthquakes, you may think about California. However, earthquake fault lines run throughout the country, and earthquakes can occur along any of these fault lines and may be felt many miles away. Approximately 90 percent of homeowners in California do not have earthquake coverage, and the rates are even higher elsewhere. Earthquake coverage is affordable, and it can protect from significant or total loss in the event a serious quake hits.
Now is a great time to reach out to your insurance agent and to review your current coverage. Determine if you need any optional coverage in these specific areas, and inquire about other coverage that your insurance agent recommends.
As a vehicle owner, you may be well-aware of the risks that you face for financial loss each day. Each time you get behind the wheel, you risk being involved in a costly accident. Some vehicles are even severely damaged while they are parked on the side of the road or in a driveway. You also face financial risk related vehicle theft. Such events can and do happen to people every day, and the unfortunate reality is that some people are surprised to learn that their standard insurance policy does not fully reimburse them for their losses or provide them with compensation to purchase a replacement vehicle. This can be financially devastating news. However, new car replacement coverage is available, and it can provide you with the monetary reimbursement you need in critical times such as these.
What Is New Car Replacement Coverage?
Gap insurance and new car replacement coverage are closely related, and many people purchase them together. Gap insurance essentially pays off the remainder of the car loan balance that your standard auto insurance policy did not pay off. It prevents you from suffering financially if you are upside down in your car loan at the time of a theft or total vehicle loss situation. New car replacement coverage generally provides you with additional reimbursement for a percentage over and above the damaged car’s value so that you can make a down payment on a new car. For example, you may receive compensation at 10 to 20 percent above the car’s current value after the loan balance has been paid in full. In many cases, these two policy types overlap to give you more comprehensive coverage. However, because each policy is unique, it is important to ask what the coverage entails and to determine if you need to purchase gap and new car replacement coverage separately.
What Are the Benefits of New Car Replacement Coverage?
When your car is in an accident or is stolen, you typically will be responsible for paying the car insurance deductible. This deductible is necessary for your insurance provider to pay off the current car loan with the insurance benefits. Therefore, you may have to pay $500 out-of-pocket just to get out of your last car loan. The insurance company may not pay you any money toward a new car purchase. This means that you must then come out of pocket to make a down payment of a few thousand dollars or more in some cases. With new car replacement coverage, you can eliminate the financial strain associated with having to make an unexpected down payment on a car. This coverage makes the down payment for you. This can help you to control your personal finances, obtain a lower loan payment and avoid being upside down in your new car loan right from the start.
Where Can You Purchase New Car Replacement Coverage?
New car replacement coverage can benefit all car owners regardless of whether they have a car loan or their car is owned free and clear. You can typically obtain new car replacement coverage through your auto insurance company. Many insurance providers offer this type of coverage as a rider or endorsement on a standard policy for an affordable rate. In fact, this coverage may only add a couple of dollars per month to your premium payment. It is important to compare rates for all of your auto insurance needs before you purchase a new policy. As you contact different insurance companies, ensure that they have this type of coverage available. Then, compare the benefits that the coverage provides. For example, one policy may reimburse you up to 10 percent of your current car’s value, and other policies may reimburse you up to 20 percent.
Smart drivers will take time to assess their risks for financial loss with all aspects of vehicle ownership. Then, they will learn more about coverage options available through various insurers that can mitigate their risks. The right insurance policy can drastically reduce your out-of-pocket expenses in the event of an accident or theft, and this can help you to better manage your finances. With this in mind, consider the need for new car replacement coverage, and compare costs to find the right policy for your needs.
When you purchase a car insurance policy, you understandably expect that policy to provide you with coverage for all potential financial losses you may incur. However, the reality is that car insurance actually only covers stated loss events up to the specified coverage limit. There are many types of losses that are common in accidents, theft situations and more that are not covered by a standard insurance policy, and these holes in your coverage create the possibility for financial loss. By learning more about these holes in your policy, you may be able to determine if you need to invest in more coverage.
Personal Property in the Car
There are many times when you may have valuable items in your car, such as your laptop or other electronics, a wallet full of cash you just pulled out of the ATM machine and more. Theft and accidents alike can result in partial or total loss of these items. Your standard auto insurance policy does not provide coverage for personal property, but you can upgrade your policy so that it includes personal property coverage up to a specified limit. Your insurance agent can recommend a reasonable amount of property property insurance to purchase.
All Drivers in Your Home
You may think that your auto insurance policy would cover all drivers in your home equally. The typical auto insurance policy will only honor a claim if an approved and insured driver is operating the vehicle at the time of the event. If you have recently gotten married or if your teen has started driving, ensure that you add these new drivers to your auto insurance policy to avoid having to pay for loss events out of your own pocket.
The Full Amount of Your Auto Loan
One of the primary purposes of auto insurance is to pay off your car loan after an accident or theft so that you can afford to purchase a new car. However, a standard auto insurance policy only pays off the loan up to the amount of the coverage limit. The coverage limit typically equals the current market value of the car. If you owe more money on the car loan than the vehicle is worth, you may find out that you are responsible for paying off the remainder of the loan and that the insurance company also may not give you any extra money to use as a down payment on a new car. Both new car replacement insurance and gap insurance can be added to your policy to avoid this type of situation.
Many people make after-market customizations to their vehicles, and these can be very expensive in some cases. A vehicle customization may be something as simple as adding leather seats to the interior, or it may include retrofitting the car to accommodate your disability needs. You will need to add a special rider or endorsement on your auto insurance policy to cover damage or loss to these after-market customizations you have added to your car.
Business-Use of the Car
You understandably expect to be able to use your car for any purpose, and this may include making money. Whether you are delivering pizzas, using your car for ridesharing to make money or have other business-use activities for your car, you may need a special rider or endorsement. Otherwise, any losses you incur while using the car for business activities may not be covered by your policy.
A base amount of car insurance is required by most states in order for you to be legal on the roads, and some auto lenders have their own additional coverage requirements that you must meet. However, when you purchase these base coverage options, you may still not be fully insured. You can see that there are many scenarios that very realistically could happen to you, and your current policy may not approve your claim. Because financial loss related to a car accident, theft and other similar events can be substantial, it is important that you understand the holes in your current policy. Take time to discuss optional coverage available to help you fill these holes today so that you can drive more confidently with the full protection you need.
A car accident can be painful and emotionally devastating to deal with. Your trauma from the accident can get even worse when you learn that your insurance company is totaling out your car and that their compensation for the vehicle is not enough to pay off your loan. Essentially, you are in a financial bind that requires you to come up with several hundred dollars or even thousands of dollars in some cases simply to pay off your current car loan. Then, you may need to come up with even more cash to make a down payment on a new car. Such situations are more common than you might think, and this type of scenario can be avoided if you simply purchased gap insurance.
How Does Gap Insurance Work?
The reality is that your standard car insurance policy will only reimburse you an amount up to the current value of the vehicle at the time of the accident or theft. Many people, however, are upside in their car loans. This means that they owe more money on their loan than their car is actually worse. This often happens when you fail to put down a large enough down payment when you buy a car, when you put a lot of miles on your vehicle or even when you take out a car loan with an extended loan term. Gap insurance can be purchased for a rather affordable price in most cases, and it generally pays off the remainder of your auto loan balance that your standard insurance proceeds did not pay off. Some gap insurance will even compensate you for your auto insurance deductible and provide you with some proceeds to purchase a new car with. Each policy is unique, so take time to compare the options fully before you decide which type of coverage you need or if you even need it at all.
Who Should Buy Gap Insurance?
Before you make the decision to purchase gap insurance, it is important to understand how people can get upside down in a car loan. Some people were upside down in their last car loan, and they rolled over the difference into their new car loan. This automatically creates an upside down situation with your current car loan. In other cases, vehicle depreciation is to blame. Vehicles depreciate often at a rate of 10 to 20 percent per year. This may be even higher if you put a lot of miles on your car or are otherwise hard on it through your driving habits. Because you can expect an automatic decline of 10 to 20 percent per year, however, you can see that you start out in the red if you fail to make a sizable down payment on the car. In addition, with a long term loan, you are paying off a very small amount in principal during the first few years of the loan. This can also create an upside down situation. Therefore, the people who gap insurance can benefit most are those who are rolling over a loss from their last car loan, those who need a long loan term, those who drive a lot and those who are not making a large down payment. Anyone with a car loan may find themselves underwater with their loan, so unless you pay for your car in full with cash, buying affordable gap insurance may be wise.
Where Can You Buy Gap Insurance?
If you have decided that you need to purchase gap insurance, you have two primary options available. You can purchase it directly from the dealership or lender when you get your loan. This is typically a one-time fee of several hundred dollars. A more affordable option, however, may be to obtain coverage from your auto insurance provider. The average gap insurance premium is $20 per year, so you may save a modest amount of money by getting a quote from your provider. Remember that coverage benefits vary, so compare policies closely.
Many people will fortunately never need to file a claim against their gap insurance. However, in the event coverage is needed, you will be relieved that you took the time to purchase this additional and beneficial coverage.