You’ve seen the television commercials. The husband or wife walks downstairs on Christmas morning, peeks out the window and sees a giant bow with a luxury car underneath, courtesy of the spouse. Does that really happen?
Yes, it does, for a pretty good reason that goes beyond – but doesn’t ignore – generosity. It turns out that December is one of the best months for luxury car sales. That’s largely because of end-of-year discounting, most analysts say.
What the commercials don’t show is the gift giver buying car insurance BEFORE driving the luxury car off the lot. Yep, the giver likely will want to secure the auto insurance coverage as well. What’s the big deal? Well, there are several factors the luxury car giver should consider before pulling the trigger on a deal on auto insurance.
What kind of coverage do you need?
The first question is, what kind of coverage will you need for your gift vehicle? Liability is a given – it’s required in every state at a minimum level. That’s the coverage that helps protects you if you cause an accident and injure someone else or cause property damage.
The coverage is usually listed as a three-number ratio. The first is the amount the policy will pay per person for injuries; the second is the maximum payout for injuries; and the third is the amount it will pay toward property damage. Keep in mind that these are the maximums your policy could pay – not the amount you could have to pay. States set minimum levels for this coverage; but you’ll need more than the minimum amount. That luxury car could be seen as dollar signs for the victim of the accident, so you’ll need to make sure you’ve got protection.
Depending on what state you live in, you could also be required to buy uninsured/underinsured motorists coverage. It does just what the name suggests: protects you in case you’re injured and have property damage because of another motorist who has too little or no coverage. This protection also helps you in a hit-and-run accident.
You’ll have plenty of options to consider as well, of course. You’ll likely want collision insurance; that will help pay for repairs to your car – minus your deductible – if you collide with something other than an animal on the highway. Typically, you use this for repairs to your vehicle when you cause a wreck. You also likely will want comprehensive coverage. That covers repairs or replacement – again minus the deductible – for other events, including vandalism, fire, glass breakage, flood, earthquake or hitting an animal. It also covers theft, and since the luxury car could be a target of thieves, you’ll likely want this coverage as well.
While states don’t require collision and comprehensive coverage, lenders often do. If you paid cash, of course, you’re free to roll the dice on this protection.
Do you need to close the gap?
If you’re not paying cash, you’ll also need to consider gap coverage. Here’s what gap insurance does: If you have a total loss of your vehicle, it pays the difference between what your car is worth and what you owe on it. Keep in mind that the value of a car drops anywhere from 10% to 20% once you drive it off the lot. Also keep in mind that if you got a loan to buy that expensive Christmas gift, you could – counting the interest on the loan – owe more than the car is now worth.
If you total the car on the way home, you could be on the hook for that entire amount even though you’ll only get the actual cash value of the car from your insurance provider. That’s the case for gap insurance, and it could be extra useful for a high-value vehicle.
So if a luxury car is on your Christmas list, make sure you tell Santa to also look into the insurance for it. The only thing that’s left is to pull the keys from the stocking, run out to the driveway and take a spin, knowing that you’re fully covered.
Source: AutoInsurance
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