.drivingdotca’s Lorraine Sommerfeld: “Think you’re covered if you’ve totaled your car? Read the fine print—if your car is written off, you could instantly be underwater on your loan”:
With the recent J.D. Power report of 30 per cent of Canadians trading in their cars and carrying an average negative equity of over $7,000, it’s time to think about ways to protect yourself from events affecting the value of your vehicle that are beyond your control.
The good news is the newer your car, the less likely you will suffer bodily injuries. Manufacturers are building cars with outstanding safety features, even on entry-level vehicles. There’s never been a safer time to be in your car; while fatalities were up two per cent in 2016 over 2015, serious injuries were down four per cent in the same time period. Looking back over two decades, however, there is a distinct tumble in both categories. Consider the difference since 1997: a 35.
Limited Waiver of Depreciation: Available from all insurance companies on a new car or demo — usually under 5,000 kilometres — this coverage removes the depreciation factor for 24 months up to 60 months, depending on your company. If your car is written off, you will receive the amount on the bill of sale. Cost will usually vary between $50 to $75 annually for this coverage.
Gap Insurance: At the point of sale, the car dealership will offer you gap insurance. Unlike the previous two, this third option covers the “gap” in between what the insurance company will pay out in the event of a total write off, and what is owed on the car. It’s sold as an extra, and as with all the other things you have to consider, like undercoating and extended warranties, costs can vary.
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