Gap insurance is a very important type of insurance coverage in Texas.
Gap insurance covers the gap between what you owe on a financed or leased vehicle and what you will be able to recover in compensation from the insurance company if the vehicle is declared to be a total loss.
In Texas, it’s also possible to obtain gap coverage through purchase debt cancellation or gap waiver products, but those products aren’t always the same as gap insurance
Without gap insurance, you could find yourself responsible for paying back a loan or buying out a lease on a vehicle that you can no longer drive. This can be financially devastating, so it is important to determine if you need gap insurance before an accident.
If you have gap insurance and your insurer is not paying as required, you may be able to pursue a bad faith claim. If you do not have gap insurance and someone else caused your accident to occur that totaled your vehicle, you may be able to get help pursuing a claim for compensation.
The San Antonio car accident attorneys at The Aguirre Law Firm, PLLC is here to help, so give us a call today to schedule a free consultation and learn more.
Looking at a simple example is the best way to understand gap insurance. Let’s say that you borrowed $25,000 for a vehicle. Cars tend to go down in value faster than you can pay off car loans, especially if you do not make a large down payment or if you choose a car loan with a long repayment term.
So, let’s say that after two years, you still owe $20,000 on the vehicle, but the car’s market value is now only worth $14,000. If you become involved in an accident and your car is totaled, which means it is damaged beyond repair and declared a total loss, then the insurer will only pay the fair market value of the car.
The insurer would pay you $14,000 because of what the car is worth, but you would owe $20,000. The difference between what you owe and what the car is worth is the gap. If you have gap insurance, it will pay off that difference minus any exclusions or deductibles. If you don’t, you are going to be responsible for paying the $6,000 out of your pocket for a car you do not have.
If you have gap insurance coverage, your insurer should hopefully pay the difference between what you owe and what your car is worth. However, if your insurer denies a legitimate claim or refuses to pay the amount that is due to your lender, then the insurer may be acting in bad faith, and you can pursue a claim against the insurer.
If you do not have gap insurance and become involved in an accident, you will want to focus on maximizing your recovery for the vehicle, especially if another driver was to blame and if your overall damages are substantial.
The Aguirre Law Firm, PLLC can help you to negotiate with the insurer of an at-fault party, or with your own insurer, to try to recover the largest amount possible to pay off your loan and cover your other losses.
If you own or lease a vehicle and there is a chance you may end up owing more on the vehicle than you would be paid if it is totaled, you need to put gap insurance in place right away. Your lender or lease provider may require it, but even if they don’t, you should have this coverage to protect your assets.
If you have already been in an accident and are facing challenges obtaining a fair payout from insurance or compensation from the at-fault driver, you should contact The Aguirre Law Firm, PLLC today to schedule a free consultation and learn how we can help.
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