Fill the Auto Insurance Coverage Gap

What went wrong when your insurance company covered only 40% of the unpaid amount due on the car loan when you accidentally totaled your car?  The sister of our account manager asked the above question when she learned that her co-worker is required to come up with the unpaid amount close to $10,000 after the co-workers accidently totaled her car.

You left holding the bag alone.  What are the options besides paying up? Nil at this moment but you can fill the gap easily when you first take out your insurance policy.  How?

There are two little promoted car insurance coverage* that can do the trick.
1.    New Vehicle Replacement – that provides full replacement cost coverage to the damaged vehicle in case of a total loss.  This mostly applies when the vehicle is less than I year old.

2.    Auto Loan/Lease Coverage – fill up the gap between the unpaid loan/lease amount and the value of the auto at the time of a total loss.
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*These are the only brief description of the coverage and you are recommended to refer to the actual coverage terms and conditions of your own insurance policy or to consult an insurance professional.

Why didn’t she get the coverage when she took out the policy?  It may not be offered or explained to her when she was buying her auto insurance.  Her needs are just not recognized.  This triggers me to recall what I have read in the recent Consumer Reports Magazine about buying car insurance.   In the report, readers are urged to shop around to find the most inexpensive car insurance.  It even raised an optimum number of getting 10 different quotes.  I am not here to give a thumb up or down on the recommendation but want to point to other direction.  

Most of you would have visited a Starbucks Coffee Shop before and few of you without getting the caffeine boast; you may not get to the 10:00 morning meeting.  Is Starbucks coffee cheap? Not the last time I visited.  You can get much cheaper alternative from McDonald or other places but you rather brave the long line at your favorite Starbucks.  Why?  In short, it is the Starbucks’ experience.  This is also the very thing that raised Howard Schultz, CEO of Starbucks, to becoming a billionaire. At Starbucks, you are not only getting a cup of coffee but the pleasant experience and satisfaction of having your particular craves fulfilled.  You can order a double shot, soy milk, with chocolate sprinklers on top latte or any fancy combination that you may have but not in a place like McDonald.

Buying car insurance or any type of insurance in some ways is like buying coffee. You can get a cup of decent plain coffee at McDonald and the service is fast and cost little. Or you can line up at a Starbucks spelling out all your personal cravings to the barista and he or she is capable and delighted to satisfy your particular needs.  Different person would have different insurance needs because of different life styles, financial status, family members, and location of residences and other factors.  A single insurance product would not be able to fit all sizes of needs.  You want one that is tailored to your particular needs.  Insurance is still one of the most effective and affordable means to transfer your risks to the insurance carriers.  Get what you deserve but not the same cloth cutting for all sizes.​

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​Accident does happen and you may see more of it happening than seeing a full moon.  Spend some times to find the agent that who appreciates your needs, knows well about the products, takes the effort to secure the right coverage for you.