Gap Insurance Thoughts
#1
Gap Insurance Thoughts
Got a new 2016 RX350. Lender is offering me Gap Insurance for 399.00 added to loan. Which will cost 455.00 over the loan length.
Never bought Gap Insurance before, with 50 years on the road.
I believe by year 4 I would not need it. As, loan balance would be less than replacement value.
I think it is hard to find 3rd Party/Reliable Gap Insurance. And insurance companies like my State Farm want the car financed with them.
Is there an amount like 399.00 that would be considered a good buy.
Thanks for any comments,
Ken
Never bought Gap Insurance before, with 50 years on the road.
I believe by year 4 I would not need it. As, loan balance would be less than replacement value.
I think it is hard to find 3rd Party/Reliable Gap Insurance. And insurance companies like my State Farm want the car financed with them.
Is there an amount like 399.00 that would be considered a good buy.
Thanks for any comments,
Ken
#4
There is a formula for this. Obviously, if you can't afford to self insure, then throw out the formula and buy it.
Take the cost of insurance and divide it by how much you are covering. So for $10,000 it would be 4%. (I am thinking the car would at least appraise for 10k below what I paid for it). If you have a greater than 4% chance of totaling the car and it being a total loss, then the insurance is a good deal. I have yet in my lifetime to total a car and it was my fault, so way way way lower than 4%. This is how insurance makes money.
Personally, I self insure. I'll keep the $400 and take my chances.
Take the cost of insurance and divide it by how much you are covering. So for $10,000 it would be 4%. (I am thinking the car would at least appraise for 10k below what I paid for it). If you have a greater than 4% chance of totaling the car and it being a total loss, then the insurance is a good deal. I have yet in my lifetime to total a car and it was my fault, so way way way lower than 4%. This is how insurance makes money.
Personally, I self insure. I'll keep the $400 and take my chances.
#5
Thanks
I never had an accident. But many more distracted drivers out there lately. Some may not be insured.
399.00 just seemed reasonable. Peace of mind, I guess.
However, am leaning toward not getting it.
I never had an accident. But many more distracted drivers out there lately. Some may not be insured.
399.00 just seemed reasonable. Peace of mind, I guess.
However, am leaning toward not getting it.
Last edited by rugmankc; 07-22-16 at 07:07 PM.
#6
There is a formula for this. Obviously, if you can't afford to self insure, then throw out the formula and buy it.
Take the cost of insurance and divide it by how much you are covering. So for $10,000 it would be 4%. (I am thinking the car would at least appraise for 10k below what I paid for it). If you have a greater than 4% chance of totaling the car and it being a total loss, then the insurance is a good deal. I have yet in my lifetime to total a car and it was my fault, so way way way lower than 4%. This is how insurance makes money.
Personally, I self insure. I'll keep the $400 and take my chances.
Take the cost of insurance and divide it by how much you are covering. So for $10,000 it would be 4%. (I am thinking the car would at least appraise for 10k below what I paid for it). If you have a greater than 4% chance of totaling the car and it being a total loss, then the insurance is a good deal. I have yet in my lifetime to total a car and it was my fault, so way way way lower than 4%. This is how insurance makes money.
Personally, I self insure. I'll keep the $400 and take my chances.
Another factor to consider in calculations is IRS rules that allows you to write off Casualty Loss with a $100/event deductible.
Last edited by FLYCT; 07-24-16 at 06:18 AM.
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Thanks. I wasn't that aware of the AGI limitation. I've never had a gap loss with any of the 52 cars I've owned in over 50 years, . Only once was a car that I owned totaled. The other driver was at fault and his insurance company (Allstate) paid very fairly for that car.
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