Direct answer
It is often unnecessary if your down payment was large enough to cover the depreciation, as you are not likely to owe more than the vehicle’s actual cash value if it is totaled.
Financial analysis regarding automotive asset depreciation and loan-to-value ratios. For additional information about how depreciation affects the necessity of coverage, see the Insurance Information Institute.
What this means for you
It is often unnecessary if your down payment was large enough to cover the depreciation, as you are not likely to owe more than the vehicle’s actual cash value if it is totaled.
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