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Getting into an accident and making a claim on your car can result in facing some unexpected situations. You may discover that your car is not worth as much as your current loan because the value of your vehicle can depreciate over time. Recognizing how your insurance provider or the insurer of an individual who damaged your vehicle determines the value of the car can help you decide if it is worth making a claim.
Current Market Value
The cost of your car when you purchase it from a dealership is the price when it is new. Even if an accident took place within a short period of time, the vehicle has depreciated in value and the insurance company will generally use that figure to determine the replacement value of the vehicle.
Many insurance companies will use vehicle guides to determine the current market value of the vehicle. The current market value provides a starting point that determines the replacement value of the vehicle.
Additional Coverage
If you are concerned that the market value of the vehicle is significantly lower than the loan you’ve taken on the vehicle, then you can obtain additional coverage for the remaining amount. Gap insurance is added to your auto policy to pay for the loan amount that exceeds the replacement value of the vehicle. It means that when the insurer has paid for the vehicle, the remainder of your loan is paid offer by the gap coverage.
Obtaining insurance that is appropriate for your vehicle can depend on the situation and your goals. In some cases, the basic coverage that you have purchased is appropriate. In other cases, you may determine that the market value for the vehicle is lower than the amount you paid. Contact us to speak to an agent for more details.