Getting the Most Insurance Protection for Your Car

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - March 10, 2021

When it comes to protecting your financed vehicle, it makes sense to add as much coverage as possible. Lenders require full coverage auto insurance, but that may not cover everything. Here's how to mind the gap.

Financing and Insurance

When you're financing a car, you're required to carry full coverage car insurance. Since the lender is the lienholder on your vehicle title, they get paid first in the event of an accident or theft. In this case, they want to recover as much value as they can for the car so they require you to have the most protection possible.

"Full coverage" isn't a box you can tick when you're selecting coverage with your insurance provider, though. The minimum amount of insurance needed can vary by state as well as lender, so knowing the basics is vital.

What Kind of Coverage Do You Need?

There's no one size fits all insurance policy, but there are some basics you can count on in most cases. Auto insurance is a requirement for operating a vehicle in all but two states – New Hampshire and Virginia. If you own your vehicle you can have as much or as little coverage as you want within your state guidelines.

However, if you're financing the car, you must have full coverage auto insurance which not only includes liability insurance but coverage for your own vehicle as well.

Full coverage is typically considered some combination of:

  • Liability – Covers harm to another or damage to someone else's property in the event of an accident where you're at fault.
  • Comprehensive – Covers damage to your vehicle from non-accident-related causes such as storm damage or theft.
  • Collision – Covers damage to your vehicle in the event of an accident, no matter who's at fault.

Most states require you to at least have liability coverage, which protects others in the case of personal injury or property damage. Other states require more, such as personal injury protection, or uninsured/underinsured motorist coverage, or rental reimbursement. Most of these can be purchased at your insurance company or at the dealership when you're signing your auto loan contract.

Don't Forget About GAP Insurance

Even with full coverage insurance, if you're financing a car you may be left paying on a vehicle you can no longer drive if something happens. This is especially true if you're in a negative equity position where you owe more than it's worth. Auto insurance only pays for the estimated value of the car at the time of the accident or theft. If that doesn't cover what you owe your lender, you're on the hook for the deficiency balance.

To help you solve this problem, you can make up some ground with guaranteed asset protection insurance, or GAP. This insurance is designed to cover the difference between the vehicle’s value and what you owe on your loan.

GAP can be a lifesaver in a situation where your car has depreciated quickly, and it can typically be added to your insurance policy at any time, through a stand-alone GAP insurer, and you're likely to be offered it when you sign your auto loan contract. It's usually pretty affordable, costing around $20 to $40 a year when added to your existing insurance policy at the time of purchase.

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If you're looking to purchase another vehicle, CarsDirect is here for you! We not only have your inside track on new and used cars, but we can also connect you to a local dealership that works with subprime lenders, too. If you're dealing with credit that's less than perfect, are new to the world of credit, or have had a setback that brought down your credit score such as bankruptcy or repossession, let us point the way.

All hope isn't lost for a car loan when you work with the right type of lenders! To get started on your path toward the vehicle financing you need, simply fill out our fast, free, no-obligation auto loan request form and we'll take care of the rest!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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