If you have recently purchased a used vehicle, then you will need to insure your car. If you are a young person between the ages of 21 and 25, then you may pay quite a bit for your coverage. In fact, if you are 21, then you are likely to pay an average of $3,620 a year or around $300 a month to insure a single vehicle. You can greatly reduce your costs by increasing deductibles, but you probably should not drop coverage. There are many different types of coverage that are afforded to you, and some of the coverage types you see on your auto insurance may be confusing to you. Keep reading to understand a few lesser known types of coverage that you may have.
Gap insurance or guaranteed auto protection is coverage that protects you against lease fees or loan costs if your vehicle goes through a catastrophic accident. After a catastrophic accident, the costs to repair your vehicle are weighed against the value of your car. If costs exceed value, then your insurance company will pay you the value of your vehicle instead of paying for repairs. Value is figured as actual cash value or the value of your vehicle minus depreciation. A database is used to calculate this value based on the age, mileage, and the condition of your car. Cash value is often a great deal less than replacement value or the sale value of the car if you were to sell it in good condition.
Due to the low amount of the actual cash value, you may find yourself paying on the initial car loan for some time after the catastrophic accident. You can prevent this issue in two separate ways. You can opt for car insurance that offers you vehicle replacement value over cash value. You also can make sure that your policy includes GAP coverage. GAP coverage will ensure that you are provided with enough money after a catastrophic collision to pay off the balance if you financed the car.
GAP coverage is a good idea if you are a young driver with poor or very little credit. This likely means that the interest rate on your vehicle loan is a bit high, and you will be paying off the interest on the loan for a year or more before you start paying off the loan. If your car becomes totaled within this time, then your loan amount may be thousands of dollars more than the value of your car. The GAP insurance will keep you from paying that extra money on a car you no longer own.
Roadside Assistance Coverage
If you are a relatively inexperienced driver who knows very little about cars, then you may find yourself in trouble if you suddenly have a flat tire on the side of the road. If you have an older vehicle, then an overheating issue or a broken starter can leave you in a dire situation. Unfortunately, a simple tow to a repair shop can cost you up to about $125, and these costs can go up substantially if you need assistance outside of normal business hours. If you lock your keys out of your car or find that your keys no longer work for some reason, then you can expect a mobile locksmith to charge upwards of $150 just to come to your location.
While you can join a roadside assistance program to reduce costs, your car insurance may come with emergency roadside coverage. If it does not already, then you can typically add on the coverage for a few dollars a month. The coverage will often pay the full price for common services like flat tire changes, emergency gas refills, towing, and locksmith services. Jump starts and vehicle extraction from snow or mud may be included as well.
Keep in mind that roadside assistance typically will cover your car and not you. This is quite different than other roadside assistance plans. This means that the car is covered in the case that someone other than you is driving it. However, you cannot use the roadside assistance coverage if you drive a different vehicle that is not covered by your insurance plan.