Car payment insurance - Covers even during unemployment

Many of you might have been planning to buy a car for a long time, and yet haven't bought one. If the reason for the delay had been the wobbly condition of the job market, or because you're unsure about the stability of your present job, it's time for you to reconsider.

Why the unstable job market is affecting car purchase?

US citizens had been hit hard by the Great Recession. The crashing job market had resulted in a lot of unemployment. So, it's likely that the people will be skeptical about the unstable condition of the job market, and stay cautious. Those planning to buy their own car will apparently have to ensure that they'll be able to continue with the car payments. In case they're not even sure about their current job, it's better to not purchase a car at the moment.

There's still hope

Well, one option that is still open for such individuals is the car payment protection plan. This kind of protection plan acts like an insurance which provides financial compensation in case you're unable to continue with the regular car payments after a job-loss.

What is car payment insurance?

In case you lose your job, you'll most likely miss out on the ongoing car payments too. Even if you qualify for the state's unemployment compensation program, you'll still be held responsible for the due car payments. The car payment insurance pays a stipulated amount towards your car payments, for a specific time period. However, after that either you'll need to bear the costs on your own or have to give up your car. Car payment insurance is offered by the car makers when you go out to buy your own vehicle. The plus point that goes for it is that, the additional insurance protection comes for 'free'. It's more like an incentive that accompanies a regular car purchase.

When does it make sense to opt for car payment insurance?

Since car payment insurance offers financial assistance for a definite time period, it will only be rational to go for it when:

1. You're in urgent need of your own car
2. You're still working, and only anticipating a job loss
3. You're confident that even if you lose your present job, you'll be able to secure a new one before the stipulated time period gets over.

Limitations

There are certain limitations that accompany such an insurance protection like:

1. It acts like a warranty which is only valid for a per-determined time period. Suppose, the stipulated time limit is 1 or 2 years. In that case, if you lose your job after the set period of time, you have to bear the costs for car payments on your own.
2. The payments will only be made for a fixed time period. You'll be held responsible for any further payments after that, even if you're unemployed.
3. The car companies usually impose certain caps on the payment amounts. This means that they compensate for a specific amount only. If your car payments exceed that amount, you'll have to shell out the additional dollars.

It's not advisable to go beyond your means while making any purchase. Thus, even though there's the car payment insurance, one shouldn't completely rely on that while buying a car. If you're not sure of the stability of your present job, and still need to buy a car, it's better to go for a low-mileage and low-cost vehicle. That way, your car payments will also be under control. If your financial conditions improve in the future, you can definitely go for an expensive model and not lose your sleep over it.