Gap insurance in Texas is an optional coverage that can be added to your existing car insurance policies should a car be totaled or stolen. It can really save you quite a lot of money in the long run, especially if you have a car that’s likely to depreciate faster than average or if your car is leased or loaned. So, in this article, we’ll cover all you need to know about gap insurance coverage in Texas.
What is Gap Insurance in Texas?
Gap insurance aka guaranteed asset protection is the difference between the car’s actual cash value and the scheduled balance owed to a lender. In the state of Texas, gap insurance is optional! And it’s often added to your comprehensive coverage and/or collision coverage.
Auto Insurance Made Easy: Gap Scenarios
- Consider purchasing this optional coverage if you currently lease your car.
- The car you purchased depreciates quickly, more so than other cars. For example, while most cars depreciate by around 50% in 5 years, a luxury car such as Mercedes or BMW will depreciate up to 75% to 80% in 5 years.
- Have you financed a new vehicle? consider gap insurance if the down payment of your car is less than 20%
So, How Gap Insurance in Texas Works?
We completely realize that understanding auto insurance, particularly gap insurance, can seem all too confusing. So, let’s break it down in layman’s terms to help make things easier. As we mentioned above, gap coverage is only beneficial if the amount of money owed to your lenders far exceeds the car’s actual cash value.
Still a little confused? Let’s look at an example.
This may require a little research, but it’s always a good idea to figure out your car’s actual cash value. Often the trend of car depreciation is as follows:
- After 1 year on the road, a new car may be worth roughly 20% less than its original value.
- After 3 years on the road, the car’s value can drop down to 60% of its original value.
So, if you bought a brand new Nissan worth $30,000 in year 1, then by year 5, the car’s actual cash value may be only $12,530. If your car was totaled during a collision accident, then your primary forms of car insurance — comprehensive covers and collision covers- would compensate you by paying for the car’s actual cash value. Back to our example, if your car were totaled during a collision, then your car insurance policy, collision covers, would reimburse the actual cash value of the car, which is $12,530. You still would owe your lenders say that $7000 (as you have paid) has only paid back a total of $10,000 of the $30,000). If you have purchased gap insurance in Texas, it’s great news as your gap insurance coverage will pay the “gap” or “7,000” owed.
How Do You Get Gap Insurance Coverage in Texas?
There are a few different ways you can go about purchasing gap insurance in Texas. Firstly, if you lease a car, you can directly purchase gap insurance from the dealership, but this can be a lot more pricey. It’s important to always read through your lease contract provider by the dealership, as gap insurance coverage may already be included as part of your contract. It’s important to know that you can also purchase gap insurance coverage in Texas directly through an insurance agency. And this tends to be the cheaper option, especially if you already have a collision and/or comprehensive coverage with a particular car insurance company.
Got a Car Loan? Think Car Insurance is Right for You? Talk to Us Today
Purchasing car insurance, optional or not, doesn’t have to be a difficult task. The Roger Welch Agency is an independent insurance group that provides unbiased quotes from multiple car insurance companies across the state. So, talk to us today to learn more about car insurance and gap coverage in Texas.