With gap insurance, Texas vehicle owners can receive help with coverage for the remaining balance on their vehicle’s loan or lease after a total vehicle loss occurs. Gap insurance is known as a debt cancellation agreement or gap waiver. After purchasing or leasing a new car, the vehicle’s value steadily declines. Over the first few years, the value of the vehicle depreciates disproportionately. As a result, you typically owe more on your lease or loan than what your vehicle is worth.
What Is Gap Insurance?
Gap insurance, guaranteed auto protection insurance, will pay the remainder of your loan or vehicle lease if your vehicle is considered a total loss, typically either from theft or damage.
If your vehicle was in a traffic accident or stolen, you would receive a payout equal to the car’s actual cash value from your full coverage insurance plan. If you owe more on your loan than you will receive from your full coverage plan, gap insurance will cover the rest. Choosing this coverage could be of great benefit; after all, no one wants to pay for a car he or she no longer owns. You must be the original lease or loan holder to purchase gap insurance.
Exclusions exist, and some may reduce your payout from a claim. Keep an eye out for these standard exclusions per the Texas Department of Insurance:
- You have late payments.
- You owe money for warranty or other finance charges.
- Your insurance requires a deductible.
- Your vehicle has lasting damage from another accident.
Where Can I Get Gap Insurance Texas Coverage?
You should be able to purchase gap insurance Texas coverage through a dealership or insurance provider. Some insurance companies don’t offer gap insurance, although most do. WalletHub recommends getting a quote from your existing insurance provider first. Buying insurance directly from an insurer is usually cheaper, approximately $7 per month on average as add-on coverage.
Some insurance providers in Texas offering gap insurance include the following:
- American Modern Home Insurance Co.
- American National Property and Casualty Co.
- American Security Insurance Co.
- Arch Insurance Co.
- Balboa Insurance Co.
- Continental Casualty Co.
- Courtesy Insurance Co.
- Financial American Property and Casualty Insurance Co.
- First Colonial Insurance Co.
- Great American Insurance Company of New York
- Ironshore Indemnity Inc.
- Landcar Casualty Co.
- Lyndon Property Insurance Co.
- Markel Insurance Co.
- MIC Property and Casualty Insurance Corp.
- Ohio Indemnity Co.
- Old Republic Insurance Co.
- Old United Casualty Co.
- Republic Lloyds
- Securian Casualty Co.
- Sentruity Casualty Co.
- Service Lloyds Insurance Co.
- Spinnaker Insurance Co.
- State National Insurance Co.
- Transamerica Casualty Insurance Co.
- United Financial Casualty Co.
- Universal Underwriters Insurance Co.
- Virginia Surety Co.
- Wesco Insurance Co.
- Work First Casualty Co.
ValuePenguin recommends comparing rates from auto dealerships with auto insurers to find the best price. Review each of your policy’s terms and ensure that your policy has the following essential pieces of information required by law in Texas:
- You should clearly understand the length or term of the policy.
- You should know how to file claims and find the insurance provider’s address and phone number.
- You should understand the total cost of the agreement.
- You should comprehend the wait time between the total loss and when you will need to file a claim.
- You should know how the insurance company calculates your insurance after you cancel.
- You should be able to cancel your policy.
- You should find out how the insurer plans to determine a claim settlement.
Confirm that all forms of loss are covered, including all accidents, theft, weather, floods, and natural disasters.
How Much Does Gap Insurance Cost?
According to Greater Texas Federal Credit Union, gap insurance can be an inexpensive addition to your monthly payment. Costs for gap insurance coverage can vary from $500 to more than $1000. You may be overpaying depending on your dealership’s rates.
The maximum cost of gap insurance under Texas law is 5 percent of the loan’s value. The cost of a gap policy for a $40,000 vehicle could be upward of $2000. After purchasing coverage, you may cancel within 30 days to receive a refund.
Do I Need Gap Insurance?
While Texas doesn’t require GAP insurance — the state prohibits it from being a vehicle lease or loan requirement — a policy can become valuable for motorists with new vehicles if their vehicle is stolen or totaled. Gap coverage is an incredible tool if your loan balance exceeds your car’s actual cash value. According to Allstate, gap insurance also helps you clear your credit and start again with a completely new vehicle.
Vehicle owners should use gap insurance coverage together with comprehensive and collision coverages. If you file a claim covered by your full coverage policy, you will get paid up to your car’s depreciated value. The value of your car begins decreasing the moment you drive it off the lot. After its first year with you, your car’s value will have gone down almost 20 percent.
If you finance or lease a new vehicle, you most likely already have full coverage. Many lenders require comprehensive and collision policies until you completely pay off your vehicle.
You should have gap insurance in addition to your full coverage policy for the following situations:
- Your leasing or financing term is 60 or more months.
- Your down payment was less than 20 percent of the value of your vehicle.
- You had negative equity from another loan.
- Your new vehicle has a high depreciation rate.
- You are paying a high-interest rate.
If you’re thinking about purchasing gap insurance, Texas residents like you should keep in mind that this insurance type may only be available if you are financing or leasing a new car. Now, think of how much you still owe on your auto loan or lease compared to your vehicle’s current value. You can get a good idea of your vehicle’s worth by checking its specifications with online resources. Could you afford to pay out of pocket if your car was totaled in a traffic accident or stolen? If not, gap insurance could be the right coverage for you.
Check this out if you need additional information, resources, or guidance on car insurance.
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