Gap coverage is different from replacement coverage for new cars, although that type of coverage is also only available for newer cars. New car replacement coverage, as the name suggests, will pay for the costs associated with buying a new model of your current car if it adds up to an accident. Gap insurance has nothing to do with helping you buy a new car, it's just about helping you pay your loan for the full amount of the vehicle. Guaranteed asset protection (gap) covers the “gap,” that is, the difference between what your insurance company will pay and the amount of money you owe for your car loan at the time of the accident, which resulted in a total loss.
Gap insurance helps you avoid paying out of pocket for an auto loan after your car has been fully paid off. While insurance pays you for the value of your car after depreciation, the total loss of the vehicle may mean that you are still responsible for auto loan payments for many months. If a motorist decides that provisional coverage is right for him, Texas law states that the cost of such coverage cannot exceed 5 percent of the loan amount for the vehicle. Motorists who pay for their health insurance coverage in advance may be entitled to a refund once they have paid the full amount of their loan.
However, breach coverage is a popular option and should be obtained along with comprehensive coverage and collision insurance when purchased through an insurer, as it is not designed to act as a stand-alone type of protection. Some people fear using coverage because they think their insurance rate will increase if they do, but that's not the case. Motorists interested in exploring provisional insurance along with other aspects of auto coverage can find the best policy for their needs with Insurify. Texas residents have the option of enrolling in supplemental insurance through a dealer or insurance company; however, there are some factors that should be considered before completing the purchase.
Gap insurance isn't required in Texas, but it can be a good option if you're buying a new or rarely used car and are financing the purchase. Gap insurance is probably ideal if you make a small down payment on your car, if it has a fast depreciation rate, or if your loan will last 48 months or more. If your claim is approved, your Gap insurance company will issue you a settlement amount based on the remaining installment payments on your loan. Gap insurance may cost a little more on your insurance policy, but it can save drivers thousands of dollars in the event of a serious collision.
In general, you'll have to take out term insurance for a few years until the gap between what you owe and what the car is worth is closed.