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.