If you're financing the purchase of a vehicle, your lender may require you to have provisional insurance for certain types of cars, trucks, or sports utility vehicles. Your car dealer or bank may offer you uncovered coverage when you buy your car. However, check with your insurance agent to see if your company has a better offer. You won't need supplemental insurance forever.
Eliminate insurance when your auto loan is less than the value of your vehicle. If there's ever a time when you owe more for your car than its current value, supplemental insurance may be worth it. If a vehicle is destroyed or stolen before the loan is repaid, Gap insurance covers the difference between the car insurance payment and the amount of the loan owed for the vehicle. Once a car's total has been paid off, Gap insurance covers the balance between what is owed under a driver's loan or lease and what your insurance pays the lender.
Gap insurance is worth it if you finance a car with a low down payment, if you have a long-term auto loan, or if you lease a vehicle. You can buy insurance without coverage at many car dealerships, although these policies are usually quite expensive. If you don't have car insurance, compare quotes from the major insurance companies that offer supplemental insurance. Common requirements you must meet to purchase insurance to cover additional expenses include being the original owner of the loan or lease and having a car that is no more than two or three years old.
In short, as long as you're willing to check with multiple insurers, you can get supplemental insurance after buying a car. If you are buying additional coverage insurance that is included in your loan, keep in mind that you will pay interest on the coverage insurance premium and on the rest of the loan balance. The depreciation of a car decreases after the first year of ownership, which means that an older car probably won't have a big difference between its value and the balance of a loan or lease. Yes, you can take out term insurance at any time before a car loan or lease is canceled, but only with some coverage insurance providers, since others will only sell coverage to the first owner of a car whose model is newer.
Without provisional insurance, collision insurance and comprehensive insurance can cover the cash value of the vehicle, but if you still owe more than the car is worth, you'll have to pay the rest of the loan or lease on your own. This coverage complements the payment for comprehensive or collision car insurance, which can only be as high as the value of your car. In addition, if you sell your car before you repay the loan and you paid for emergency insurance in advance, you are often entitled to have the part of the insurance you didn't use reimbursed. Standard types of insurance only cover the actual cash value of the car, so a driver without supplemental insurance could owe their lender thousands of dollars.
Gap insurance pays off when you owe more on your car loan or lease than the car is worth.