Navy Federal: Gap Insurance Options

Navy Federal Credit Union offers Guaranteed Asset Protection (GAP) insurance to its members. This insurance covers the difference between the outstanding loan amount and the cash value of a vehicle in the event of an accident or theft. It is available for a flat fee of $399 and can be added to new or existing auto loans. GAP insurance is optional but can provide valuable protection for eligible new and used vehicle loans, covering costs that standard car insurance does not.

Guaranteed Asset Protection (GAP) cost

Guaranteed Asset Protection (GAP) insurance is an optional product that covers the difference between the amount you owe on your auto loan and the amount your insurance company pays if your car is stolen or totaled. This is particularly useful if your loan balance is higher than the value of your vehicle, as standard auto insurance will only pay an amount up to the value of your vehicle.

GAP insurance is available from a variety of sources, including car dealerships, auto insurance companies, and financial institutions. The cost of GAP insurance can vary depending on the value of your car and whether or not it is a lease. Generally, you can expect to pay a one-time, lump-sum cost for GAP insurance, which can be as much as $600 or more. Some companies offer GAP as a recurring monthly or yearly payment. It is important to compare prices and coverage before purchasing GAP insurance.

Navy Federal Credit Union offers GAP insurance for a flat fee of $399 during the loan application process. This can be paid in a lump sum or financed into your loan, which will increase the overall cost. If you choose to add the fee to your loan amount, your monthly payment will likely increase by only a few dollars. For example, on a $24,500, 60-month loan at 4.5% APR, your monthly payment would be $458 without GAP and $465 with it.

Navy Federal's GAP insurance covers most automobiles, trucks, and SUVs no older than 7 years. Commercial vehicles, including ridesharing and food delivery autos, are not eligible. It is important to note that GAP insurance does not cover extended warranties, maintenance, or mechanical repairs for your vehicle. There may also be other miscellaneous exclusions and limitations, so be sure to carefully review the terms and conditions of the policy.

GAP and standard car insurance

GAP insurance, or Guaranteed Asset Protection, is an optional insurance plan that covers the difference between the depreciated value of a car and the loan amount owed if the car is involved in an accident. It is called GAP insurance because it covers the "gap" between the depreciated value of the car and the loan amount. This type of insurance is typically considered when buying a new car with zero or no money down.

When to Consider GAP Insurance

You may want to consider purchasing GAP insurance if:

• You made a low down payment (less than 20%) on the car.
• You are financing the car for 60 months or longer.
• You leased the vehicle (GAP insurance is generally required for a lease).
• The car you purchased depreciates faster than average.
• You rolled over negative equity from an old car loan into the new loan.
• You have a long loan payoff period.
• You drive more than 15,000 miles a year, accelerating the car's depreciation.

GAP insurance covers the difference between the depreciated value of the car and the loan amount owed if the car is involved in an accident or is stolen. It can also cover a portion of your insurance deductible, up to a certain limit.

GAP insurance does not cover:

• Extended warranties added to your car loan.
• Maintenance or mechanical repairs for your vehicle.
• Other miscellaneous exclusions and limitations specified in the GAP agreement.

Standard car insurance policies cover the depreciated value of a car in the event of an accident or total loss. This means that the insurance company will pay the current market value of the vehicle at the time of the claim. However, if the amount you owe on the car loan is more than the depreciated value, GAP insurance can cover the difference.

For example, let's say you purchased a car with a sticker price of $28,000 and made a 10% down payment. After a year, you still owe $20,160 on the loan. If the car is totaled in an accident, the insurance company will calculate the current value of the vehicle, taking into account depreciation. If the car has depreciated by 20%, the insurance company will pay $22,400. With GAP insurance, you will be reimbursed for the outstanding balance on your car loan, and may even have money left over to put towards a replacement vehicle.

Where Can I Buy GAP Insurance?

You can typically buy GAP insurance from car insurance companies, banks, credit unions, or car dealerships. It is recommended to compare prices and payment schedules from different providers before purchasing GAP insurance.

The cost of GAP insurance can vary depending on the value of your car and whether it is a lease. In general, you can expect to pay a lump sum of up to $600 or more for GAP insurance. Some companies may also offer monthly or yearly payment options. Adding GAP insurance to your existing auto insurance policy is usually cheaper than purchasing it from a car dealership.

Who should consider GAP insurance?

Guaranteed Asset Protection (GAP) insurance is a supplemental auto policy that covers the difference between the insured current value of a vehicle and the balance of a loan or lease. It is an optional plan that may cover the difference between your outstanding loan amount and the cash value of your vehicle. It is particularly useful in the event of a total collision or theft, where your car insurance policy might not cover the remaining cost of your unsalvageable vehicle.

• If you have a lease: GAP insurance may be automatically included in your lease agreement. It is generally required for a lease, although requirements vary.
• If you have a loan with a low or zero down payment: If you have a low or zero down payment on your car loan, GAP insurance can help protect you from financial losses in the event of a total loss.
• If you drive a lot: Driving more than 15,000 miles per year can accelerate your car's depreciation. In this case, GAP insurance can help cover the difference between your loan amount and the depreciated value of your vehicle.
• If you have a long loan payoff period: If you have a long payoff period for your car loan, you may owe more than the car's current value. GAP insurance can help bridge this gap and protect you from financial losses.
• If you have a car that depreciates quickly: Some cars, such as luxury sedans or SUVs, may depreciate faster than others. GAP insurance can help cover the difference between the depreciated value of your car and the loan amount you owe.
• If you have rolled over negative equity from a previous loan: If you have rolled over negative equity from an old car loan into your new loan, GAP insurance can help protect you. Make sure you choose a policy that covers negative equity.

Overall, GAP insurance is a good option for those who owe more on their car loan than the car is worth, have a long payoff period, or have a car that depreciates quickly. It can provide financial protection in the event of a total loss, collision, or theft, ensuring that you don't have to pay out of pocket to cover the remaining loan balance.

What isn't covered by GAP insurance?

Guaranteed Asset Protection (GAP) insurance is an optional form of insurance that covers the difference between the amount owed on a car loan and the car's actual cash value (ACV) in the event of a total loss. While GAP insurance can be a useful form of protection, there are certain things that it does not cover.

Firstly, GAP insurance does not cover extended warranties added to your car loan. It also does not cover maintenance or mechanical repairs for your vehicle. This includes engine or transmission failure, which are not covered by standard car insurance or GAP insurance. GAP insurance also does not cover overdue payments and late fees on your car loan or lease, lease penalties for high mileage or excessive use, or charges for credit insurance connected to the loan.

Additionally, GAP insurance does not cover carry-over balances from previous loans or leases, and it will not cover the down payment for a new car. It is important to carefully review the GAP agreement and understand any exclusions or limitations that may apply.

How to buy GAP insurance

Guaranteed Asset Protection (GAP) insurance is an optional form of financial protection that covers the difference between the amount you owe on your car loan and the car's market value in the event of a total collision or theft. It is particularly useful if you have a new car with a substantial loan amount.

Research GAP Insurance Options:

Before purchasing a car, research GAP insurance providers and their offerings. Compare prices and payment schedules from different companies, including car dealerships, auto insurance companies, and financial institutions. This will help you find the best price and ensure that you are getting the coverage you need.

Assess Your Need for GAP Insurance:

Consider whether GAP insurance is right for you. Factors to take into account include the size of your down payment, the length of your loan, the rate of depreciation of your car, and your annual mileage. If you have a low or zero down payment, a long-term loan, a car that depreciates quickly, or drive more than 15,000 miles per year, GAP insurance may be a wise choice.

Choose Your Provider:

You can typically purchase GAP insurance from your car dealer, auto insurance company, or financial institution. When choosing a provider, consider the cost, payment options, and any exclusions or limitations in their policies.

Purchase GAP Insurance:

Once you have selected a provider, you can purchase GAP insurance. If you are buying a new car, you can opt for GAP insurance during the loan application process. If you already have an existing car loan, you can add GAP coverage to your auto insurance policy or finance it through your lender.

Understand the Coverage and Exclusions:

Make sure you carefully review the GAP insurance agreement and understand the terms, conditions, exclusions, and limitations. GAP insurance typically covers the difference between your outstanding loan amount and the market value of your vehicle, but it does not cover extended warranties, maintenance, or mechanical repairs.

Cancel When No Longer Needed:

You can typically drop GAP coverage once it is no longer needed. If your vehicle is worth more than your remaining loan balance, you may want to cancel your coverage as there is no longer a "gap" to cover. Review the cancellation terms in your policy, as they may vary depending on where you purchased the GAP insurance from.

Frequently asked questions