Which coverage is useful if you total a new car shortly after purchase?

GAP Coverage is particularly beneficial in the situation where you total a new car shortly after purchase. This type of coverage addresses the difference between what you owe on your car loan or lease and the actual cash value (ACV) of the car at the time it is totaled. New cars typically depreciate quickly after purchase, meaning the amount owed may exceed the payout amount from a standard insurance policy.

For instance, if you bought a car for $30,000 and shortly afterward it was totaled, the insurance company might determine its ACV to be only $25,000 due to depreciation. If you owe $28,000 on your loan, GAP Coverage would cover the $3,000 difference, preventing you from being financially responsible for an amount that exceeds your insurance payout. This makes GAP Coverage essential for new car buyers seeking financial protection against depreciation.

Other types of coverage mentioned, like liability coverage, primarily protect against damages you might cause to other parties in an accident, rather than covering your own financial loss. New Auto Coverage is not a standard term, as most policies provide coverage for new vehicles under existing auto policies, but it does not specifically address the financial shortfall that GAP Coverage does. Protection and indemnity, typically associated with marine insurance,