What happens if you total a financed car without proper insurance?
It’s becoming increasingly popular in Canada to take out a long-term loan in order to finance a new car. According to CBC News, at one point earlier this year, 55 % of all new car loans were for at least 84 months (7 years). Unfortunately, people forget that having a loan over a long number of years does come with risks. One of the major risks is what happens if you total your car.
Let’s imagine this scenario. You took out a loan of $25,000 to pay for your new car. You’re in an accident and your car is totaled. Your insurance company determines that the car is worth $17,000. This is less than you imagined but you bought the car new so it depreciated quickly in value over time.
The insurance company pays the bank $17,000, and you still owe $8,000. This is what happens if you total a financed car without insurance to cover the loan.
However, Obvi offers a solution: GAP Insurance. Guaranteed Auto (or Asset) Protection is a type of car insurance which protects your finances when a loan is taken out to pay for your car. Going back to example of owing $8,000, this is what GAP Insurance covers.
Why do I need it?
Here are some useful points that we often go over when we explain what’s GAP Insurance.
- “I’m a sensible driver, I’m not going to crash my car…” Hopefully you won’t ever be in an accident, but what if it is stolen? Or there is a fire? Not everything is always in our control, so if you have a long term loan, you want to have reassurance that you will be financially covered in case something happens.
- The worst case; you don’t want to be left with a loan and no car- this can happen, and that’s why you need protection.
What happens if you total a financed car without proper insurance is that you could be left with a large sum you have to pay. GAP Insurance covers the GAP between the value of the car and the amount you owe in case something happens such as accident or theft. With Obvi you can purchase GAP Insurance online. Find out more and get a free quote now.