You can rest assured that you'll have the coverage you need if you purchase extended insurance for
a car purchase, although you may never need it. Different types of extended insurance purchases are
available, so determine costs and ultimate savings before pursuing any options. Lenders may require
you to purchase extended coverage, so budget accordingly.
a car purchase, although you may never need it. Different types of extended insurance purchases are
available, so determine costs and ultimate savings before pursuing any options. Lenders may require
you to purchase extended coverage, so budget accordingly.
- Full-coverage insurance is usually required by lenders. Without a loan, most states require only a liability policy, but a lender requires comprehensive and collision coverage in addition to a limited liability policy. This policy covers your vehicle for damages even in an at-fault accident. In the event of a loss, your insurance company pays your vehicle's market value to the lender. Collision coverage is the most expensive coverage you can purchase. If you're not using a lender, consider the cost of a full-coverage policy and the value of your vehicle to determine if the purchase is worthwhile.
- Many lenders require increased limits for the liability portion of your collision coverage and insurance companies often recommend increased limits for liability-only policies. State requirements may not offer enough coverage. Deductibles, or the amount you can expect to pay out-of-pocket for repairs for an at-fault accident, are also optional. Most lenders require a $500 deductible or less. Talk to your insurance agent about cost differences to determine if lowering your deductible is beneficial. Your payment may increase, but you'll have adequate protection if you do have an accident.
- Gap insurance is required by some lenders and is often a requirement for leasing. Otherwise, it's optional. This extended coverage offers financial liability protection in the event of a loss. If your insurance company's determined market value and payout do not cover your loan balance, gap insurance picks up the difference so you don't have to. Without it, you would have to satisfy the loan even though you no longer have your car. Purchase gap insurance if you owe more than your vehicle's market value.
- Purchase an extended warranty to cover vehicle repairs, which limits your out-of-pocket expenses during the term of your warranty contract. Depending on the warranty coverage you choose, you may spend several thousand dollars to purchase an extended warranty. Talk to a warranty provider to determine best coverage options, making sure to choose the correct term or mileage based on your driving habits. The warranty may pay for itself the first time you use it, and is well worth consideration.
