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Everything you need to know about insurance basics, like coverage types, limits, cost and more.
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There are a lot of good reasons that make full coverage on your car a good idea. If you find yourself wondering, “Why do I need full coverage on a financed car?” ask your local auto dealer’s financing team — they’ll be very direct about their car loan insurance requirements. You need full coverage when a bank lends you money on a car because your lender needs to know that you’ll be covered if the car is totaled in an accident.
And because new cars depreciate about 20 percent in their first year, you’ll probably want to pick up loan or lease gap coverage insurance, too. It’s important coverage that helps pay for the difference between the amount you owe on the car and its actual cash value.
Full coverage is comprised of a suite of insurance policies that together provide full coverage. These policies include collision, comprehensive and liability coverage. And each type of insurance plays a key role in protecting your new vehicle and your savings if you’re in an accident.
Full coverage offers lenders and vehicle owners broad spectrum car protection. But as a car ages, it’s going to depreciate at a rate of about 10 percent annually. And if your car isn’t worth much, you may not need full coverage anymore because the limits that pay for expensive repairs to your car won’t be reachable. Given the vehicle’s limited resale value, it may not make sense to carry a policy like this.
If that leaves you pondering questions like, “If my car is paid off what kind of insurance do I need?” — don’t worry, it’s a common concern. It’s a good idea to consider the value of your car and match it with coverage that protects it best. If you paid for a new car in cash, and own it outright, full coverage still makes good sense because you’ve got a lot to protect if something should happen.
Full coverage policies are priced like most other insurance products. Your premium will be based off of many factors, like:
As your car gets older, you’ll find maintenance costs can start to escalate and that worn out parts need replacement. The time may come where you may consider trading that old car in for a newer, more dependable model. While you’re reviewing your options, reach out to your American Family Insurance agent and request a quote. You’ll find they’re able to help you leverage discounts and help you with ways to save on your premium that can help make great coverage really affordable.
