(800) 253-1482Texas Gap Insurance Explained
Summary: Gap insurance helps you pay off the difference of your loan or lease after totaling your vehicle or in the event it’s stolen. While you still must pay your deductible, gap insurance coverage is a great option for those who wish to affordably protect against large financial losses. This is especially true for drivers with newer vehicles. Always compare your options before enrolling to determine which coverage works best for your needs. Estimated Read Time: 6 mins
Table of Contents:
- What Does Gap Insurance Cover?
- How Does Gap Insurance Work?
- Do I Need Gap Insurance if I Have Full Coverage?
- Is Gap Insurance Worth It?
- Where To Buy Gap Insurance?
- How Much Is Gap Insurance?
- Pros and Cons of Gap Insurance
- Free Online Quote From Gap Insurance Companies in Texas
Guaranteed Asset Protection, better known as gap insurance, helps you pay off your vehicle after an accident when you owe more than the vehicle is worth. This is done by paying the difference between your vehicle’s actual cash value (ACV) and what is owed on your loan or lease after your deductible.
Because vehicles in Texas depreciate at an incredible rate, when financing the purchase of your car, it is easy to owe more than it is actually worth. If it becomes totaled, this becomes a problem and can cause financial pitfalls for you. The right gap coverage protects against such losses at an affordable rate.
What Does Gap Insurance Cover?
Gap insurance covers the remaining portion of your loan if it is stolen or totaled. while you still owe money on it. Car loans are common and for many drivers, the difference between the steep depreciation of a financed vehicle and the value at the time of an accident can create a financial burden.
This means without gap insurance coverage, you will not only deal with a hefty payment towards a vehicle no longer in use, but you’ll also have to figure out how to purchase another vehicle.
Comprehensive auto insurance can protect against theft and collision coverage can help you restore your loss after totaling your vehicle. But both of these coverages have policy limits.
When your auto insurance’s policy limits arise, you’ll not be hit with the full amount to restore the loss, however, any additional repairs will need to come from your own pockets. Car gap insurance is a great additional policy that helps protect you and your vehicle without overpaying.
How Does Gap Insurance Work?
After a total loss or if your vehicle is stolen, you can submit a claim to restore the loss. If you owe more than the vehicle is worth and have gap insurance for cars, you’ll receive the difference between your car’s value and what is owed, minus your deductible. For example:
- If you owe $15,000 but your vehicle is only worth $10,000, there would be a difference of $5,000 you would still owe your lender.
- Those with gap insurance would receive the remaining $5,000.
- In this scenario, take into consideration that neither figure accounts for your policy’s deductible, which will still be deducted beforehand. However, you still receive a higher payout with gap insurance.
Do I Need Gap Insurance if I Have Full Coverage?
For many reasons, full coverage insurance is not a blanket protection that will cover everything. Therefore, if you want to be better protected against certain perils, you’ll need to inquire about additional, optional coverages, such as gap insurance.
Some certain perils and scenarios can still arise and cause you financial setbacks. It’s important to understand your own financial risk tolerance and plan accordingly. This includes covering the rising costs of labor and parts, and even your loan following the aftermath of a major accident. This is why gap insurance is so important even with full coverage.
Is Gap Insurance Worth It?
For many drivers in Texas, gap car insurance is worth it, but it’s not for everyone. Here are a few considerations that can help you determine if gap coverage insurance is right for you:
- You owe more than your vehicle is worth.
- You are financing your vehicle and have put down a small down payment (less than 20%).
- You are leasing your vehicle.
- Your vehicle depreciates at a faster rate than most other vehicles.
- You are accident-prone and/or spend a lot of time on the road.
- You live in an area prone to auto thefts.
With gap insurance being a very affordable option, if the above applies, you may want to speak with a licensed insurance agent to discuss your options. Particularly, if you are “upside-down” on your loan or lease near the beginning when gap insurance is at its most valuable.
Where To Buy Gap Insurance?
Many dealers offer gap insurance, but you can also purchase coverage from insurance carriers. If you want to get the lowest rate for your coverage, it’s important to shop and compare many different rates and carriers. Using an auto insurance company with multiple carriers can help. Here’s why:
- Gain a more complete picture of how much your coverage costs.
- Find and compare multiple brands with ease.
- Bundle your gap insurance coverage with other auto insurance policies and your home or renters policy for more savings.
- Get help on finding discounts and the lowest rate quickly.
How Much Is Gap Insurance?
The cost of your gap insurance policy will vary depending on the amount of your loan. In the state of Texas, the law prohibits gap insurance from costing a motorist more than 5% of the overall loan value.
This means that if you were to purchase an SUV with a loan of $60,000, your gap insurance cost would be no more than $3,000. You’ll also need to cover your deductible in most cases.
Gap insurance isn’t required by law and can be canceled by the policyholder for a complete refund so long as the cancelation is within 30 days. Many drivers can expect to pay several hundred dollars for their gap insurance coverage as a one-time fee.
Pros and Cons of Gap Insurance
For some drivers, gap insurance is a great way to enjoy affordable protection. However, for others, it’s an extra expense that may not benefit drivers as much as they might expect. It’s important to weigh your options. Here are the pros and cons of gap insurance in Texas:
|
Pros |
Cons |
|
Peace of mind through coverage with affordable premiums |
Limited coverage for older vehicles and policy limits |
|
An extra layer of financial protection |
Exclusions may also exist |
|
Coverage for drivers leasing their vehicles |
Won’t cover previous loan balances |
Free Online Quote From Gap Insurance Companies in Texas
No matter which part of the Lone Star State you call home, Freedom Insurance Group is here to help keep you covered. You can receive your accurate, free gap insurance quote here by using our easy-to-use tool. With just a few clicks of a button, see how we save our clients 40% on average through our partnerships with more than 25 top-rated insurance providers.
