To carry car insurance is mandated by law. Nobody can escape the fact that every driver should carry auto insurance with him while driving. But carrying insurance is not enough. We should also understand what is the coverage associated with our premium. Buying a policy that you are not familiar with what it can do is useless. You might be having it but unable to avail of the coverage because you don’t know what you paid for.
There is much available coverage to choose from. Depending on your needs as a driver, you can select the best insurance policy. One policy that is very important is the loan or lease payoff coverage. The actual premium will vary according to the type of vehicle insured.
This coverage is available if you have an unpaid car loan to a company not to individuals. If the value of the car is lower than what you owe the lender, this coverage will take care of the amount. In some insurance companies, the amount needed to be paid should not exceed more than 25% of the total value of the car being insured. That is the dollar amount limited to the payoff.
An interesting question on this coverage is: why wouldn’t my auto insurance company just pay off the loan or lease that I have? Auto insurance companies do not ordinarily pay more than the actual cash value of the car. So if you owe more than the cash value of your car, your insurance company will not shoulder the difference. The amount you still owe the lender will be coming from your personal budget.
Taking advantage of this coverage would be beneficial to you if you will be in an accident while you are still paying for the car. After the comprehensive coverage or the collision coverage took care of the total cash value of your car, this auto insurance coverage will take care of the remaining amount that you owe your lender or car dealer.
There are lenders and car dealers offer loan/lease payoff coverage. This is for their protection just in case the car will be damaged while you are still paying for it.
Of course, there are still restrictions depending on the state where you reside. This kind of car insurance coverage is not available in the states of New York and North Carolina.
It is not expected that the market value of your car will remain the same after you purchase it. It goes without saying that the actual value of the car depreciate through time. And if it is still unpaid before it gets into a road accident, there will be somebody who would take care of you if you have loan/lease payoff coverage.
One important prerequisite before you can avail of this coverage is for you to have a comprehensive and collision coverage.
If you have additional questions regarding any car insurance coverage, the best person who can actually answer that is your insurer. Always ask for additional information anytime you need it.