The legal minimum for car insurance, in most states, only covers liability. This ensures that, should you be found at fault in an accident, the other party is able to collect on their damages. Comprehensive and collision coverage will cover repairs. But it might leave you paying quite a bit out of pocket, if your car is totaled in an accident. The best way to ensure full coverage is by investing in gap insurance and replacement car insurance. Here's what you need to know:
What Is Gap Insurance?
If you are still paying off the loan on your current car, a basic comprehensive and collision policy is unlikely to cover the payments you have left. This may leave you paying for a car that you don't even own anymore. Gap insurance simply pays off the remaining payments, minus the deductible, so that you don't need to worry about the loan. Of course, gap insurance won't cover both that loan and the cost of a new car. For that you will need replacement car insurance.
What Is Replacement-Car Insurance?
Replacement-car insurance helps you to buy a new car if your current vehicle is totaled. Comprehensive and collision insurance will pay you the value of your current car if it is totaled. But, given depreciation, inflation and so on, you may find that what your auto insurance pays you well below what you thought your car was worth. Replacement-car insurance is there to get you back on the road right away. Better-car replacement insurance will even help you to purchase a one-year-newer model of the same make.
These options will raise your premiums a bit, but gap insurance is typically quite affordable, and replacement-car insurance may cost you less than you'd expect depending on the make and model of your auto. Auto insurance is as much about practicality and security as it is about peace of mind. What you buy with gap insurance and replacement-car insurance is comfort in the fact that, should your car be rendered inoperable, you've got a safety net there to catch you.