Know AAA

Totalled Car

Insurance

My new car was totaled!

Having a total loss on a new car is a double-whammy: the disappointment of losing a new car, plus the shocking realization that the loan or lease balance may be greater than the amount paid by the insurance company.

The value of used cars is plummeting, in part due to zero-percent financing and a glut of used vehicles on the market."People who purchase vehicles with little or no money down will likely find they owe more than the car is worth when seeking their next new vehicle," said Jim Rookard, director of insurance services for AAA Colorado.

For example, a Ford Taurus with a sticker price of $23,305 just two years ago commands a trade-in value of only $8,350, a whopping 64% depreciation. A two-year-old Chevrolet Suburban suffers 45% depreciation from its new value, and a Nissan Maxima SL depreciates 33.7%.

As if the decreased value wasn't enough, the real problem lies in the fact that the loan amount on many cars decreases only slightly in the first two years.

Owing money after a car has been totaled is extremely frustrating. Fortunately, there is a relatively simple solution. An "endorsement" is available on personal auto policies, called "gap coverage" because it "fills the gap" between the amount owed on a vehicle and the actual cash value paid by the insurance company for a total loss.

The cost to add the gap endorsement is usually inexpensive (typically $50 to $100 annually, depending on numerous variables), and it means you won't have to keep making payments on a totaled car.

Insurance carriers, in general, will allow you to add the gap endorsement when insuring a car that's two years old or less. Most will only allow it on a new policy-they will not add the endorsement to an existing policy.

By adding gap coverage to a personal auto policy, the consumer will typically see a significant savings over gap coverage that may be offered by the auto dealer. Consumers should also look closely to determine whether coverage is capped for add-ons such as extended warranties or maintenance agreements. For more information, call 800-251-7189 to speak to a AAA Colorado insurance agent.