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 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 insurance policy can provide coverage against such loss all at an affordable rate.
Gap Insurance Coverage
Gap insurance is protection in the event your vehicle is stolen or totaled while you still owe money on it. Car loans are common and for many motorists, especially when considering the steep depreciation new vehicles undertake after purchase, an accident can create a financial burden that requires a hefty payment towards a vehicle no longer in use.
Comprehensive auto insurance can protect against theft. Collision coverage can help you restore your loss after totaling your vehicle. But these coverages have policy limits, and as much as we would love to see the world in black and white, gray areas do arise. 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. Gap insurance is a great additional policy that helps protect you and your vehicle without overpaying.
How Much Is Gap Insurance in Texas?
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 will be no more than $3,000. You’ll also need to cover your deductible, though, for some policies, the deductible may also be covered by a gap policy.
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. Though gap insurance can be purchased through a dealership, drivers can often save money by purchasing this coverage through an insurance provider.
Is Gap Insurance Worth It?
Everyone’s situation is different, but if you are financing your vehicle, especially for drivers purchasing their car with a small down payment, gap insurance is great coverage. Drivers who are financing and accident-prone should give particular consideration to gap insurance as it will also protect you in the event your vehicle is totaled and you are at fault. Though many drivers can benefit from this coverage, here are a few key factors to consider when deciding if gap 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 these characteristics fit you, the coverage may be a viable option in keeping you protected. In many cases, you may be “upside-down” on your loan or lease for the first two years which is when gap insurance is at its most valuable.
Can Gap Insurance Be Refunded?
Yes, if you enroll in gap insurance but cancel within 30 days, a full refund may be issued. Of course, every policy and insurance brand is different. It is always best to refer to your insurance agent and your policy to understand the terms and conditions that apply.
When To Cancel Your Gap Insurance Coverage
The Texas Department of Insurance (TDI) recommends canceling your gap insurance coverage only when you owe less than the value of your vehicle. Overall, this happens after around two years. Gap insurance can also be canceled should you sell your car, if your loan is paid off early, or if your lease is up.
Can You Get Gap Insurance on a Used Car?
Yes, in the state of Texas, drivers may purchase gap insurance for a used car. The catch, however, is that under normal circumstances, this will only apply to vehicles that are three years old or younger as most policies must be written within the first three years of the car’s life. You also may be limited by who will write you a gap insurance policy. This is just one of the reasons we recommend drivers compare and shop among a variety of insurance brands to find the best coverage for their needs.
Gap Insurance For Leased Cars
Purchasing gap insurance during the duration of your lease is an important step in safeguarding your finances. Oftentimes, lease agreements may have gap insurance coverage built into the contract, but third-party options from insurance providers are often inexpensive options that provide the same protections for less.
Additional Auto Insurance Policies to Consider
For many reasons, auto insurance is not a blanket coverage that will protect against everything. What that means for motorists in the state of Texas is that to protect against more perils, there are a variety of auto insurance coverages that will need to be purchased. No, not everything is required by law. Even gap insurance is optional, however, on the open road, many things can happen. Minimum coverage keeps you legal. You have to carry a minimum amount of liability coverage to stay legal in Texas, but your policy is to help restore the loss of another party, not your own. The right gap insurance policy will help you pay off your vehicle after an accident.
But some certain perils and scenarios can still arise and cause you issues. Even with the rising costs of labor and parts, not every accident will result in totaling your vehicle, yet restoring your vehicle is still an expensive task. Explore the many options available to you that can keep you from paying for a sizable loss involving your vehicle for better peace of mind and savings:
- Comprehensive insurance helps you avoid paying out of pocket for destructive accidents that don’t involve another vehicle, such as, when hitting an animal or when a tree branch falls on your car.
- Collision insurance will help restore your vehicle after an accident even if you are at fault. It should be noted that while both comprehensive and collision policies are recommended to coincide along with your gap insurance coverage, each will also come with deductibles. The higher your deductible, the lower your monthly premium, and vice versa.
- Uninsured/underinsured motorist coverage helps you restore your vehicle after either being damaged in a hit-and-run, or an accident in which an at-fault driver has insufficient coverage. There are millions of uninsured drivers and sadly Texas continues to see a high number of hit-and-run accidents each year.
Purchasing multiple policies can often lead to savings due to multi-policy discounts. You’ll also receive better overall coverage against more perils. Speak with an agent about your risks and how you can best protect yourself and your vehicle without overpaying.
Free Gap Insurance Quote for Texas Drivers
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 much you can save today!
Hailing from Flower Mound, Texas, we understand the needs of Texas drivers and work with you on a personal level to deliver affordable coverage for less. On average, we save our clients around 40% when switching.
Our incredible network of more than 25 top-rated insurance providers allows our agents to compare your coverage among trusted providers quickly to deliver the best insurance products on the market at the lowest rate. Every driver is different and so too are the needs, histories, and risks associated with said driver. You shouldn’t have to overpay for basic coverage that might not protect you in the best way, and with Freedom Insurance Group, you don’t have to. Whether it’s simply staying legal or adding important protections such as gap insurance, we help all of our clients find the policies and discounts they need to stay protected for less. Contact us today!