Can new car replacement coverage pay off my loan on my Mazda CX-5?
I have new car replacement coverage through Travelers. My car is totaled and I want to get a new one. Will my new car replacement coverage pay off my loan so I can get a new car?
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Answered on May 07, 2021
“If you have new car replacement coverage through your insurance, they will pay or reimburse you for the cost of a similar make and model. This doesn’t mean they’ll pay off your loan, though.
For your loan to be paid off, you’d need gap insurance. Alternatively, your car’s actual cash value (original price minus depreciation) would need to exceed your loan balance.
With new car replacement coverage, you’ll get a new car but your loan balance will remain the same. Insurance companies want to ensure you’re not profiting from an insurance transaction, so they compensate you so you are in the same financial position as you were before the accident. “
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