Should I Get Gap Insurance

[that1guyy]

My question involves insurance law for the state of: Texas

I got a loan through Navy Federal credit union and have the option to add their optional GAP insurance but trying to figure out if it's worth it. It's $299 and will be included in my monthly payments. My loan amount was $17.799 and my term is 72 months. I've done some reading and research trying to find out how people determine whether or not they need it but I'm not understanding. Should I get it? I know I have to have Collision and comprehensive coverage in order to get it, right?

[adjusterjack]

If you got a brand new 2019 car look at the same 2018 car and see how much the value has dropped. Your loan balance will drop a fraction of that amount in the first year and if you had a total loss you might have to come out of pocket a couple of thousand to pay off the loan. You can figure all that out with the Kelley Blue Book online or NADA or Edmunds and the following calculator for your loan amortization.

http://www.bretwhissel.net/amortization/amortize.html

You'll probably decide to buy it.

Amortize the $299 separately and see how much interest you'll pay on it. Then consider paying cash for it separately.

[paddywakk]

Get it. My nephew didn't because he thought it was too expensive, and when he rolled and totaled his truck there was a $3000 difference between what he owed and what it was worth (and therefore what the insurance company would pay).

[that1guyy]

Also, with GAP could I get rid of certain options on my insurance policy? I mean does having GAP in some cases make it to where you no longer need some of the options because GAP covers it?

[adjusterjack]

No. GAP only covers the difference between what you owe on the loan and what the car is worth at the time of the wreck or theft or fire or any other total loss.

It doesn't have any effect on your other insurance.

[flyingron]

Whether there is a gap or not depends on how big your down payment is. Whether you need the insurance or not (and this applies to many insurance situations) is whether the situation that you are insuring for is something that you couldn't handle without it if it occurred. For example, if you've 100% financed the car and the payments are already at the limits of your affordability, gap insurance is probably essential. If the gap is negligiable or you have enough savings reserve, perhaps you can save the premium money.

You might also check with your lender. Many credit unions (and in fact, the even my auto insurer who offers financing as well), will include "gap coverage" at no additional cost in the loan (essentially, they just waive the difference).

[that1guyy]

No. GAP only covers the difference between what you owe on the loan and what the car is worth at the time of the wreck or theft or fire or any other total loss.

It doesn't have any effect on your other insurance.

Got it. Thanks

Whether there is a gap or not depends on how big your down payment is. Whether you need the insurance or not (and this applies to many insurance situations) is whether the situation that you are insuring for is something that you couldn't handle without it if it occurred. For example, if you've 100% financed the car and the payments are already at the limits of your affordability, gap insurance is probably essential. If the gap is negligiable or you have enough savings reserve, perhaps you can save the premium money.

You might also check with your lender. Many credit unions (and in fact, the even my auto insurer who offers financing as well), will include "gap coverage" at no additional cost in the loan (essentially, they just waive the difference).

Yea I put $0 down. Also, I stated that the GAP for $299 was from the credit union that financed me.

Thanks

If you got a brand new 2019 car look at the same 2018 car and see how much the value has dropped. Your loan balance will drop a fraction of that amount in the first year and if you had a total loss you might have to come out of pocket a couple of thousand to pay off the loan. You can figure all that out with the Kelley Blue Book online or NADA or Edmunds and the following calculator for your loan amortization.

http://www.bretwhissel.net/amortization/amortize.html

You'll probably decide to buy it.

Amortize the $299 separately and see how much interest you'll pay on it. Then consider paying cash for it separately.

I got a certified preowned 2018 Kia Optima. I Didn't know what some of the things meant on that site from the link you provided so I used this one..

https://www.amortization-calc.com/au...an-calculator/

and the interest for just the GAP was $59.. $4.97 a month. Didn't think of the interest on the GAP being added to the monthly payments. Thanks for pointing that out

[cdwjava]

I don't recall ever paying THAT much for GAP insurance. However, it has come into play for us twice. The first time, when one of my sons totaled his brother's (used) Range Rover and the insurance payout was going to come about $6,000 short, and another time last year when another son's car was totaled (and he nearly died ... worst days of my life) the GAP insurance saved him about $4,000 on his Hyundai.

A few years into the loan, it may make sense to get rid of the GAP insurance, but, it may depend a great deal on the value of the vehicle and what you feel comfortable losing. I always get GAP insurance on cars I finance.

[that1guyy]

Happy your son survived the accident. How much do you usually pay? The dealership I first went to tried to charge me over $3000 for GAP along with an extended warranty I'm sure I didn't need. I didn't even know until I called who was going to finance me just to ask general questions about something else. They just happened to mention it was added along with an extended warranty I'm sure I didn't need. I was pre-approved and pretty much had a set price, APR and monthly payment. Adding those to made the monthly payment go up over $100 and I wouldn't have known that was the reason. Good thing I had told them I wanted to come back. They tried to get me to sign everything before I left saying it would be faster when I came back :\

Anyways, $299 seems way more affordable than thousands. I think Navy Federal used to charge $199