Navy Federal Auto Loan Insurance Requirements: Full Coverage Or Bust?

If you're getting a car loan through Navy Federal Credit Union, you'll typically need to carry full-coverage auto insurance. This is to ensure that if anything happens to the vehicle while you're still paying it off, the cost of repairing or replacing it will be covered by insurance. Full-coverage insurance includes liability coverage, collision coverage, and comprehensive coverage. Even if you're not financing a vehicle, it's generally a good idea to have these protections as part of your car insurance policy.

Full coverage insurance is required for Navy Federal financed cars

If you're financing a car through Navy Federal Credit Union, you'll typically be required to carry full-coverage auto insurance. This is to ensure that, if anything happens to the vehicle while you're still paying it off, the cost of repairing or replacing it will be covered by insurance.

Full-coverage insurance includes liability coverage, collision coverage, and comprehensive coverage. Liability coverage helps to cover damages (up to your policy limits) that you cause to another vehicle if you're found at fault in a car accident. This coverage is mandatory in most states. Collision coverage pays for damages to your vehicle if you're in an accident, and usually requires a deductible. Comprehensive coverage takes care of damages to your vehicle caused by something other than a collision, such as vandalism or falling objects, and also usually requires a deductible.

Even if you're not financing a vehicle, it's generally a good idea to include these protections as part of your car insurance policy. Once you've paid off your car loan, you can drop the full coverage if you wish, but it's a requirement listed within the promissory note while you're still making payments.

Navy Federal doesn't add lender-placed insurance

Typically, when taking out a car loan, the lender will require you to have full-coverage insurance on the vehicle. This is to ensure that, in the event of an accident or damage, the cost of repairs or replacement is covered by insurance. This is the case with Navy Federal Credit Union, which usually requires full-coverage insurance on auto loans. However, Navy Federal does not add lender-placed insurance (LPI) or force-placed insurance.

Lender-placed insurance is a type of insurance policy placed by a lender on a property when the borrower's insurance coverage has lapsed or is deemed insufficient. This type of insurance is typically associated with mortgages and homeowners' insurance. In the context of mortgages, if a homeowner's insurance policy lapses or is cancelled, and the homeowner does not secure a new policy, the lender may purchase LPI to protect its financial interest in the property.

LPI is intended to protect both the lender and the borrower in the event of damage or destruction to the property. It covers any home, regardless of its location or condition, even in high-risk areas that other insurers may not cover. However, LPI can be more expensive than standard property insurance policies, and it may have limited coverage, excluding personal items or owner liability.

While Navy Federal does require full-coverage insurance on auto loans, it does not appear that they engage in the practice of lender-placed insurance. It is important to note that full-coverage insurance for auto loans includes liability coverage, collision coverage, and comprehensive coverage. This protects you, the lender, and other drivers in the event of an accident, vandalism, or other damage to the vehicle.

Liability coverage is mandatory in most states

Liability car insurance won't pay for your own medical bills or car repairs. To cover your own bills, you'll need to purchase additional types of insurance, such as personal injury protection or health insurance for medical expenses, as well as collision insurance for repairs to your vehicle.

While liability insurance is a mandatory minimum in most states, it may not be enough if you're financing or leasing a car. Lenders and lessors typically require borrowers to purchase and maintain full coverage on the vehicle to protect their investment. Full coverage includes liability coverage, as well as comprehensive and collision coverage. This ensures that both you and the lender are protected in the event of an accident or damage to the vehicle.

It's important to note that the requirements may differ from lender to lender, so it's always a good idea to carefully review the loan agreement and consult with your lender to understand their specific insurance requirements.

GAP coverage is optional

Guaranteed Asset Protection (GAP) coverage is optional for car owners. Whether you purchase GAP insurance will not affect your application for credit or the terms of any existing credit agreement with Navy Federal.

GAP insurance is an optional auto insurance coverage that applies if your car is stolen or deemed a total loss. When your loan amount is more than your vehicle is worth, GAP insurance coverage pays the difference. For example, if you owe $25,000 on your loan and your car is only worth $20,000, GAP coverage will cover the $5,000 gap, minus your deductible.

You can choose to pay the GAP insurance fee in a single lump sum or finance it into your loan, which would increase the cost. However, California Active Duty and Active Reserve Duty servicemembers cannot finance the fee. If you cancel your optional GAP coverage within 60 days of enrollment, you will receive a full refund of any fees.

GAP insurance is a good idea if you:

• Made less than a 20% down payment
• Financed for 60 months or longer
• Leased the vehicle (carrying GAP insurance is generally required for a lease)
• Purchased a vehicle that depreciates faster than the average
• Rolled over negative equity from an old car loan into the new loan

Even if you are not financing a vehicle, it is almost always a good idea to include these protections as part of your car insurance policy.

You can save with a member benefit on auto and home insurance

When taking out an auto loan, Navy Federal Credit Union typically requires borrowers to have full-coverage auto insurance. This comprehensive insurance includes liability coverage, collision coverage, and comprehensive coverage. While this may be more expensive than a basic liability policy, it ensures that the vehicle is protected in case of an accident or damage.

Navy Federal Credit Union members have access to a special member benefit on auto and home insurance through Liberty Mutual. This partnership allows members to save money on their insurance policies.

Simplified Account Management

By bundling your auto and home insurance with the same provider, you can simplify your account management. This means having one point of contact, one policy, one premium, and one mobile app to keep track of. This reduces the risk of missing a payment due date, as you only need to schedule automatic bill payments in one place.

Potential Discounts

Most insurance companies offer discounts when purchasing multiple insurance policies, also known as a multi-policy or multi-line discount. This can result in significant savings on your insurance premiums. For example, Progressive reports that new customers save more than 20% on average by bundling home and auto insurance, while State Farm cites average savings of $1,073 annually.

Save on Deductibles

In the unfortunate event that a covered incident damages both your home and car, having bundled insurance can save you money on deductibles. With bundled coverage, some insurance companies will only charge you one deductible for such events, whereas having separate policies from different insurers would require you to pay two separate deductibles.

Exclusive Benefits

In addition to potential savings, bundling your insurance with Liberty Mutual through Navy Federal Credit Union may provide you with exclusive benefits. These could include services such as roadside assistance, identity protection, travel services, and various other valuable discounts.

Peace of Mind

Having full-coverage auto insurance provides peace of mind, knowing that you are protected in case of an accident or damage to your vehicle. This comprehensive coverage includes liability coverage, which helps cover damages to another vehicle if you are at fault in an accident, as well as collision and comprehensive coverage for damages to your own vehicle.

By taking advantage of the member benefit on auto and home insurance through Navy Federal Credit Union and Liberty Mutual, you can not only save money but also gain access to exclusive benefits and simplify your insurance management.

Frequently asked questions