Did you know that the moment you drive off in a brand new car, it will begin to lose its value! A brand new car can drop in value anywhere from 20% to 30% within the first year alone in Texas. Over time, the car’s value will continue to diminish, so a car that was purchased or leased at $30,000 3 years ago may only be valued at $20,000. If your car is stolen or totaled, then car insurance policies will only pay out the car’s actual cash value. So, in this article, we’ll cover the importance of Gap insurance in Fort Worth.
What Does GAP Insurance Mean?
To understand Gap insurance coverage, we need to familiarize ourselves with other auto insurance forms, particularly collision coverage and comprehensive coverage. Should your leased car experience damage due to collision, auto insurance policies such as collision coverage and comprehensive coverage will pay up to the depreciated value. Gap insurance in Texas is an optional form of car insurance that helps you pay off the amount owed to a lender should your car be totaled in a collision. In simple terms, a Gap is defined as the amount owed to a lender and the car’s actual cash value. The actual cash value is defined as the value of your car over a period of time.
How Does Gap Insurance Work?
To understand how Gap insurance coverage works, let us look at a brief example. Year 1, you purchase a brand new car for $50,000. Year 2, your car is totaled, and as a result, it is no longer driveable. Totaled is defined as the difference between the cost of repairing a car vs. the actual value of the vehicle. So, if the cost of repairing a car far exceeds the vehicle’s actual value, then the car is defined as totaled.
So, if a car is totaled in year 2, you still need to pay around $45,000 regarding the car loan. If you have collision coverage, then the great news is that this form of auto insurance will pay out the depreciated value of your totaled car, which, in this case, maybe $40,000.
So, who pays the other $5,000 to the lender of your car? This is where Gap insurance coverage comes in handy! As a the coverage will pay out that additional $5,000 back to the lender, so you don’t have to.
How Much Does Gap Insurance Cost in Fort Worth, Texas?
You can purchase Gap insurance coverage through a car insurance agency or from the lender/dealership where you leased your new car. The cost of gap insurance in texas will vary accordingly, but often you’ll find that auto insurance agencies charge anywhere from $30 to $40 a year. In contrast, a dealership/lender will charge a flat fee ranging anywhere from $400 to $800.
Car Insurance is Hard to Understand: Here are a Few Facts About Gap Insurance in Texas
- In Texas, this form of insurance will cover totaled cars and stolen cars. If your car has been stolen and is not recovered, then your gap insurance coverage will step in.
- In the state of Texas, your car’s lender may make loan gap insurance a requirement as part of your financing. Similarly, you’ll find that some dealerships may include lease gap insurance as part of your collision and comprehensive coverage.
- Gap insurance in Texas is highly recommended when your car loan has a high-interest rate. This is because it will take a lot longer to pay off the principle on the car.
Gap Insurance Covers, so Talk to Us today About Car Insurance Policies.
Gap insurance is important when a vehicle owner leases a car and has paid little regarding down payment. It can also be important to vehicle owners who have a long payoff period. At James Little, we understand that the entire process of comparing and purchasing car insurance policies in Texas may seem like a daunting task. James Little is an independent insurance agency that works for you, the policyholder, and not the insurance company. Our team of agents can do the hard work for you and compare insurance rates to see what works best for your situation. If you’re ready to purchase Gap insurance in Texas, reach out to us to receive a free, no-obligation quote today.