Gap Insurance?

Question

Is it really necessary? I just bought a 2007 Jeep Patriot and it is being offered by my credit union. I know it prob is a good idea, but, when your counting each penny - is it a REALLY GOOD idea?

Answer 1

Depending on the cost, you should definitely get GAP insurance . Credit unions tend to offer it at a lower rate than everyone else , usually a few hundred dollars.

GAP covers the difference between what you owe and the car and what your auto insurance covers. For instance, if you how $25000 on your loan but your insurance pays $18000 (based on depreciation), GAP covers the $7000 in between. If you don't have GAP , you're stuck owing that amount while looking for a new car.

Somone suggested you try your auto insurance company, as a former insurance representative this is not something auto insurance carriers typically offer, though it doesn't hurt to check.

I know in a few states such as Washington, insurers are required to offer it as a part of the insurance coverage.

Answer 2

Only if you owe more money on the Jeep than you would get it you totalled it.

That means, if you put down 10% when you bought it, you don't need gap. If you didn't, you probably do.

Go to www.kbb.com, and figure out what the average PRIVATE SALE value for that Jeep is, right now, with the current milage, in your area. Then go get the finance papers, see how much you financed. If the second number is bigger than the first, you need GAP coverage.

Frequently what happens is you put very little down on the car, and then it gets totalled (VERY common if you're under 25), and you get the actual cash value of the Jeep - usually not more than 80% of what the sticker price is, as cars depreciate DRAMATICALLY the second you drive them off the lot.

The result is, you owe $3,000 more for the Jeep than the insurance pays, AND you don't have a car.

Answer 3

Look at it this way. If you buy a $25,000 vehicle and finance it 100%, it is not worth $25,000 as a used car, yet you still owe $25,000 on it.

If you get into an accident two months from now, you'll owe more on the car than it is worth as a used vehicle. Your auto insurance is going to pay you Actual Cash Value, or the used car price and you're still going to owe the bank the difference.

GAP insurance covers that difference. However, it's absurdly expensive for what you get.

There are several auto insurance companies that are now offering GAP coverage on their auto policies at a much better price than the banks and credit unions are offering it at. Call your insurance agent and see if your company offers it.

Your other option is to pay enough down on the car now so that you're never in the position of owing more than the vehicle is worth.

Answer 4

Its insurance (a gamble).
If you are buying a new car, put little down then GAP insurance is worth it if your car gets totaled. That way you break even rather than owe and need to buy another car.
If you buy a used car at a fair price and put at least 10-15% down and your car is totaled then you could break even or ahead. In this case GAP is not needed.
If you've already bought the new car, with little down and did not get GAP...better pay $50 - $100 extra on each payment.
I've been hit twice in 5 months and both cars were totaled.
Its all so scary.

Answer 5

gap insurance is mostly requested when you lease a car specially if is no down payment involved. In a total loss the difference between the value of the car and what you owe may be greater than the insurance coverage. The gap will cover the difference. Each state is different but shouldn't increase the premium that much

Answer 6

Gap insurance is very helpful. If you were to get in an accident anytime during the life of your auto loan and the vehicle was totalled, the insurance company is only going to give you a check for the value of the vehicle. They don't care how much you owe on your loan. You will have to pay the lender the difference. Gap insurance covers this difference. It happened to me. I was in an accident and the car was totalled. The car was only worth $5000, but my loan balance was $8000. I had to pay the difference of $3000 out of my pocket because I didn't have gap insurance. It is very inexpensive, too.

Answer 7

I would never, EVER turn down GAP insurance. It will only raise your payment about $2 a month, but just imagine if your car is totaled in an accident--that $2 a month just saved you literally thousands. It will cover what your insurance won't, and usually your regular insurance will only reimburse you for what the car is *worth, not for *what you owe* on it, and brand new cars depreciate by thousands as soon as you drive it off the lot.

Answer 8

Gap insurance is expensive coverage for what you get. I would suggest putting more down on the vehicle if you can. If not, you have to decide whether it is worth the risk or not. If you have an accident in the first year, you may not get full value for your vehicle. You can also check with your insurance agent to determine of replacement cost coverage is available and compare the price.

Answer 9

Yes GAP insurance is very important, but b4 you sign up at your credit union, call your insurance company. Usually, it is much cheaper through them. I have it on one of my cars and pay an additional $22.00 every 6 months. Considering the car went upside down at least $4,000 as I drove off the lot, it's well worth it.

Answer 10

It depends on the cost. I know when one of my auto insurance customers has NEEDED it, they have been glad to have it. It can sometimes cost less on your auto insurance policy. Check it out.