What Happens If I Total a Financed Vehicle?
When someone is in an accident, their insurance provider will weigh the cost of repairing the car against its current value. If fixing the car isn’t economically feasible, they will consider it totaled. Here’s some information on the insurance requirements for a financed vehicle and what happens if it gets totaled.
Insurance Requirements for Financed Cars
Every driver in Texas must carry the minimum amount of auto liability insurance. This type of policy includes bodily injury and property liability coverage. In Texas, the minimum value for bodily injury liability is $30,000 per person and up to $60,000 for each accident. The minimum for property damage liability coverage is $25,000. If you financed your car, some loan companies may also require you to have comprehensive coverage. Comprehensive coverage is for damage that’s caused by something other than a car accident, including theft or damage caused by natural disasters.
When obtaining insurance for a financed car, you’ll need to list the financing company as a loss payee. If your car is totaled, regular auto coverage will only compensate you for the cash value of the vehicle. You would be responsible for covering the difference between the car’s current value and the outstanding balance on your loan.
Why Gap Insurance Is a Good Idea
Once you buy a car, its value begins to depreciate. Unless you made a substantial down payment, you will probably end up owing more than the car is worth. If your car gets totaled, gap insurance protects you by paying the financing company the difference between your loan balance and the car’s cash value. Gap insurance is not mandatory in Texas; however, you should strongly consider getting it if you financed your vehicle.
Regardless of how you purchased your car, you have to understand how each type of insurance protects you. At RG Insurance Agency, our experienced agents can explain which auto insurance policies make sense for your situation. To get a quote, call 956-702-2705 or contact us online.