Guaranteed asset protection (gap) insurance helps provide coverage for drivers who finance or lease vehicles. This coverage may help pay off your vehicle if you owe more than it’s worth and your insurer deems it a total loss after a covered accident.
What Does Gap Insurance Cover?
Gap insurance helps bridge the “gap” between your insurer’s settlement and the total amount due to pay off the debt. Without it, you may be left owing your lender a significant amount of money, even after the insurance company’s settlement.
Is Gap Insurance Required for Texas Drivers?
In general, gap insurance is not required. Leasing companies and auto lenders may require borrowers to purchase this coverage to help provide the company with additional financial protection if the vehicle is totaled, depending on their policies.
Gap insurance is typically added to full coverage insurance, which includes collision and comprehensive coverage. Full coverage insurance may help pay to repair or replace the covered vehicle if it’s damaged in an at-fault accident or due to events beyond your control, such as a hailstorm, fire or theft.
When you are in an accident, or your vehicle is stolen, your insurer determines whether the damage to your vehicle is worth fixing. If the costs of repairing the covered vehicle exceed a certain percentage of the vehicle’s value, your insurer may choose to total the vehicle. Insurance companies typically pay the value of your vehicle in one of two ways, depending on your policy.
- Actual cash value (ACV) insurance can provide a settlement equal to your car’s value minus depreciation.
- Replacement cash value (RCV) insurance can provide a settlement equal to the amount of money it would take to replace your vehicle with a similar one, but they do not deduct depreciation.
When you purchase a new car, its value typically depreciates quickly during the first few years of ownership. With ACV insurance, you may owe much more on a loan or lease than the car is worth. The insurance company’s settlement may not be enough to pay off your debt if the car is a total loss.
How to Get Gap Insurance
Gap insurance may be offered by the dealership where you purchase your vehicle. However, adding this coverage to your current auto insurance is often less expensive.
Contact Iglesias Insurance in McAllen, Texas, to learn more about gap insurance and get a personalized quote.