Quote:
Originally Posted by Gmo
My concern is in the odd chance of being totaled, if the insurance is only giving me say $11k and I owe $14, I would be $3k out of pocket.
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Yeah. That would be an "upside down" situation, and is the express purpose of having Gap insurance. Here's the thing, though. Gap insurance is like a predatory penalty on being financially overstretched. Being upside down is bad m'kay? A situation you would prefer to avoid, and usually can.
Gap means paying extra money, right now, every month, and for several years because you didn't have enough upfront to prevent ever being behind on the value. You didn't have/put up enough money on day 1, so you pay more on days 2-2190 (6 year note)...for something you shouldn't need, and whose need goes away the more you pay in. And you pay that amount for the policy whether the gap "covered" was $2.47 or $50,000. For a potential problem that only has a small chance of occurring, and an even smaller one of it being a big enough gap to need help. Value disparities are going to be negligible/non-existent at the end of the loan term.
Gap has its purposes, just like ...ahem, adjustable rate, no-money-down, interest-only, negative amortization mortgages do. They're not all sinister. They have a purpose, for a few its a necessity, but they are a LOOOOONNNG ways from being anything approaching a good value for money on a risk-management basis.