Why Gap Coverage is important California Auto Insurance

Our automobiles are a necessity in this day and age but more then that we love them and so we find the very best California auto insurance to protect them. The automobile has become a necessity for most Americans with many people owning more then just one automobile. That mesmerizing stare that overcomes us when we drive home a new car and park it in the driveway for the first time is hard to resist. Some spouses have commented that their significant other loves their car more then them! I doubt that this is true but it is true love indeed. This is why understanding gap coverage is so important for protecting your car.

Value Gap Coverage of California Auto Insurance

The very first moment that you drove your new car off the dealer lot it decreased in value by at least ten percent. It is a shame for sure but that is the way and it happens to us all. The term used to describe this decrease in value is “depreciation.” Depreciation doesn’t stop there either. For each year you drive the car and with each mile you put on the speedometer the depreciation continues. At the end of about 8 years the car has little or no blue book value. At that point if your car is totaled the amount of money you will receive in a settlement is going to be small.

Now you probably did a number of things to curb the depreciation amount of the car over the years. Regularly scheduled oil changes, new tires and the addition of some optional features may have added value to the car. Unfortunately most people don’t protect the value of the car by opting for “gap” coverage with their California auto insurance. This optional coverage costs a little more but if the car is totaled a much larger and more realistic amount will be paid if a claim is filed. Otherwise you can expect to be paid the standard amount stated in the policy if the car is totaled.

Loan Gap Coverage

There are more important aspects to obtaining coverage then just receiving your California auto insurance card. Most new cars are financed today and loan companies make the loans to purchase them. The loans are paid off over a 4-6 year period with the borrower making monthly payments. During this loan period the balance goes down as payments are made, but so does the value of the car. Remember a financed car depreciates just as rapidly as one that is owned outright.

If your California auto insurance policy is going to pay off your car loan the value of the car will have to be equal to the loan balance. This is not always the case and is dependent on the interest rate and the loan term. You could end up with a balance still remaining if the car has depreciated faster then the loan balance. This balance will have to be paid out of pocket. Gap coverage however will make up any difference in the loan balance and the value of the car. It will make sure you are able to pay off your loan and pick up a new car easily and quickly.