full coverage w/ state farm and gap insurance?

I just bought a CR-V. I have full coverage w/ State Farm. I bought Gap insurance for 287 at the dealership. I thought this was a good buy. My dad says that since I have full coverage if I have a total loss we're covered by State Farm for the full amt. I've had friends that have wrecked their cars and only got 3k back. Should I keep or cancel my gap?

6 years ago - 4 answers

Best Answer

Chosen by Asker

Nope, Dad is wrong. Full coverage doesn't mean what he clearly thinks it means.

It actually means, you have at LEAST state minimum liability coverage. You don't necessarily have any medical coverage, or lost wages, unless it's required. You don't necessarily have any rental coverage, or towing coverage. As far as the car itself, you have collision (who knows what deductible, it could easily be $1,000) and comprehensive coverages, but it only pays the ACTUAL CASH VALUE of your car. That means, if the sticker price was $17,000, and you paid $17,000, and financed $17,000 plus tax, title, registration, and put down $1,000 on your car, the second you drove it of the lot, it's now a USED car, and worth maybe $13,000. If you totalled it, you'd probably still owe about $4,000 after State Farm paid the ACV, PLUS, your deductible.

So dad is WAY WAY wrong.

The only time you can get rid of the gap coverage, is when the loan payoff amount is less than the ACV of the vehicle. Figure the ACV by getting the private party sale value from Not retail, not dealer markup, not financing costs. Private party used car value.

Don't take insurance advice from people, no matter how well meaning, that don't have a license to give you insurance advice.


6 years ago

Other Answers

State Farm, and any other insurance company, will only cover the value of the vehicle. As soon as you drove it off the lot it lost value so if wrecked you would not get what you owe.

Almost all auto insurance companies also offer gap insurance for much less than through the dealership. However, it's probably too late to change and you should keep your current plan.


by Zarnev - 6 years ago

Your dad is forgetting that an auto policy is an Actual Cash Value policy.... not a replacement cost policy (like his Homeowner's policy - probably). If your car is a total loss due to a covered loss, and you have comprehensive and/or collision (which ever applies) the insurance will replace/pay for your loss. So you totaled a 2008 CR-V, that had 7200 miles on it at the time of the loss. So, it was a USED vehicle. the adjuster will probably go to Kelly Blue Book and get a value on your car. subtract the deductible and pay you accordingly.

You could have probably have gotten the GAP coverage through your insurance company for less money than the dealership, but, that boat has sailed... lol So wait until it's up for renewal, and then talk to your insurance agent. In the future.. remember, car salespeople are for selling cars, insurance salespeople do an excellent job of selling insurance, but they usually stink at selling cars. LOL

GAP coverage usually protects your down-payment.

by larsgirl - 6 years ago

There is a gap of what the vehicle is worth because of the loss you have from just driving off the lot. If you sleep better knowing if anything happens to you new car, then it's worth the peace of mind to keep it. State Farm could only give you the current value of the car if there was an accident and you would come up short. That;s what you need to decide on how important the money you'd have to pay off is to your budget.

by debijs - 6 years ago