30 Jun Gap Insurance and Regular Insurance Reviews
You’ve probably heard advice about updating your insurance periodically, but have you ever wondered why that’s so important? It’s not just about getting the best rate. (Although that can certainly be a bonus!) Regularly reviewing your auto insurance and home insurance with your agent ensures there isn’t a gap between your loan amount and your insured amount.
Loan Amount vs. Cash Value
Auto and home insurance cover just the replacement cost or cash value for your home or vehicle. Considering interest, how the market can change, and that your vehicle loses between 15% and 20% of its value as soon as you drive it off the lot, you can see how what you owe may be greater than the cash value of what you’re insuring. For instance, you may owe $15,000 on your vehicle, but the Kelley Blue Book value is only $10,000. If your car were totaled, your insurance would pay $10,000 and leave you with $5,000 to pay out of pocket. With your home, the deficit between your mortgage and property value may be even greater.
Gap Insurance and New Car Replacement
One way you can eliminate this risk is with something called gap insurance. It’s an add on to your existing policy that, as the name suggests, closes the gap between what you owe and the cash value of your possession. Some carriers will pay off the cash value plus a certain percentage, 25% for instance, as an alternative to gap insurance. New car replacement means just that a new car is replaced if your current car is damaged. This is an add on to your insurance auto policy. If you’re not sure about your carrier’s options, you should definitely talk to your Spivey Insurance agent.
The Importance of Regular Reviews
Even if you’re certain the amount of your loans doesn’t exceed the value of your assets, regular reviews are also a smart idea because insurance is always changing. There may be discounts you aren’t taking advantage of or risks you didn’t even realize you had.
If your circumstances or assets have changed, or if it seems like you haven’t spoken with us in a while, give us a call at 704-821-4460! It could save you some money now or a lot of hassle down the road. We’d love to hear from you and connect with you on Twitter, Facebook, Instagram, YouTube, LinkedIn and Pinterest.