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Why Your Car's Age Affects Its Cost Of Coverage

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How do you determine the type of coverage, the amount of deductible, and coverage limits to have for your auto insurance? Many factors go into this determination, but your car's age should be one of them. Here are three types of coverage that should be influenced by the age of the car:

Roadside Assistance

Just like the name suggests, roadside assistance coverage pays for the cost of getting you back on the road or to a mechanic shop if your car breaks down by the roadside. Typical roadside assistance includes towing your car to a mechanic, changing a burst tire, jumping a battery, and retrieving keys locked inside the car, among others.

Any car can break down, but an old car is more likely to break down than a new one. A new car may run for a long time without breaking down, but with an old car, belts snap, radiators leak, and starters fail. If you have an old car, it's just a matter of time before it breaks down, and when it does, you need roadside assistance to get back on the road without a hustle.

Comprehensive or Collision Coverage

Collision coverage pays for your car if you crash into another car or object or if it rolls over. Comprehensive coverage covers damages caused by all other events except collisions with other cars. For example, if your car is damaged by fire, comprehensive will pay for the repairs and replace it if it is totaled. Again, comprehensive and collision might be more important for a new car than an aged one; replacing or fixing up a damaged old car might not be worth the yearly premiums for comprehensive coverage.

However, there is a condition that may force you to pay for these forms of comprehensive coverage even if you consider the car old – your financier may demand it. As long as you are still paying for your car, you need to abide by your financier's conditions, and a common condition is to insure it against all risks. This condition is common with new cars, but there are also those who finance used cars and require them to be fully insured.

Gap Insurance

Gap insurance pays for the difference between what you owe on your car and how much it is worth. This coverage becomes handy when you haven't finished the car's payments, but it is depreciated to the point where you owe more for it than it is worth. Remember, if you total such a car in a crash, the financier will still demand the whole balance.

For example, if you owe $13,000 on a car and it is worth $10,000, then gap coverage would pay for the $3,000 if the car is totaled. As you can see, gap insurance only makes sense if you are still making the car's payments, and the car has depreciated. You don't need this coverage once you have cleared the car loan.