In our recent auto insurance series we’ve covered a number of topics — auto insurance requirements in Texas, basic insurance policies, additional coverages, shopping for auto insurance, discounts, and making claims.

We conclude by looking at some not-so-common topics in the wonderful world of auto insurance that can benefit you when managing your vehicle coverage.

Switching Auto Insurance Companies

You may decide to terminate your auto insurance company for a variety of reasons”

• You’ve moved to Texas from another state and you want to find a local agent near your Grapevine, Dallas, or Fort Worth home or business.
• You started with an online company but things have changed and you prefer to work more hands-on with an auto insurance agent in Grapevine, Dallas, or Fort Worth
• You’re dissatisfied with your existing auto insurance company’s service or rates.

Switching auto insurance companies should be relatively painless, but be careful: If you don’t give the insurer sufficient notice, it could end up costing you money or negatively impacting your credit rating.

Standard practice allows you to cancel a policy any time during the policy term by sending written notice stating the date of cancellation. Auto insurance policies don’t necessarily terminate at the end of each policy term, so don’t assume you can just cancel by failing to pay your next bill.

If you don’t send notice of cancellation, your insurance company will automatically bill you in advance for the next term’s premium payment. If you don’t pay it, they’ll cancel your policy and it will go on your credit report.

Auto insurance companies are quick to inform you that your coverage will terminate at the end of a policy period if you do not pay the next premium, but they don’t always inform you of repercussions for not giving formal notice of your policy termination.

Something else to consider: Allowing your auto insurance policy to be canceled may hurt your chances of obtaining future coverage. A cancellation in your insurance history may cause other companies to label you as a high-risk applicant, which gives them an excuse to charge you a higher premium. You can avoid this by simply terminating your policy in a timely manner.

Call your auto insurance agent in Grapevine, Dallas, Fort Worth on online representative and let them know you want to cancel your policy and give them an effective date. They will send a cancellation request form — or provide a link to the form on their website. Review it carefully before you sign and return.

If you are switching to another auto insurance company — and you plan to continue driving the insured vehicle — make sure there is no lapse in your coverage. Even a day is important.

Be sure to coordinate the effective starting date of your new policy with the termination date of the old policy.

As long as you are considerate about giving your auto insurance company plenty of notice when you want to cancel your policy, and go through the official termination process, you should avoid any negative repercussions.

What is Gap Insurance?

We’re not done with auto insurance just yet. There’s something known as “gap” insurance that’s essential for leasing and if you made a small down payment when buying a car.

What is gap insurance? It covers what traditional auto insurance doesn’t, closing the gap between what your insurance company pays if your car is stolen or totaled and what you owe the finance company.

For example:

• You bought a car three months ago for $25,000.
• You begin making payments at about $500 a month based on a six percent interest rate.
• Disaster strikes and your car is totaled.

The auto insurance company decides at the time of the accident your car was worth only $20,000 — proving once again that as soon as you drive the car off the lot it depreciates quickly. The car may be only a few months old and it has already lost 20 percent of its value, but the finance company still wants the full amount owe them. With interest, tax, and license fees, let’s guesstimate that’s $27,000.

Now there is a $7,000 gap between the $20,000 the auto insurance company is willing to pay and the $27,000 the finance company wants.

In another example, if you buy a car without putting several thousand dollars down you’ll likely owe more than the insurance company will pay if the vehicle gets totaled or stolen in the first few years.

Gap insurance also is usually mandated by lease contracts or included in them. If a gap policy is required or not included in your contract, you should shop around for this coverage.

The best thing to do is talk to your auto insurance agent in Grapevine, Dallas, or Fort Worth. If the company offers it, great. If not, maybe the agent can make a recommendation.

In any scenario, be smart and check to see how much gap insurance is offered and how much you’re going to be paying for it. In some cases, lease contracts may include what is known as a gap waiver, which protects you from gap charges in the event that the leased vehicle is declared a total loss — eliminating the need for a gap policy.

Is gap insurance necessary for people who finance their cars? That depends on your coverage. If your regular insurance policy is written to pay off the fully financed amount, then you don’t need it.

A few things to keep in mind:

• Although most people purchase gap insurance when a lease is initiated, some insurance companies will sell a gap policy anytime during the lease term.
• You must be in compliance with all terms of the lease.
• Your gap insurance policy may not be honored if you don’t have collision and comprehensive insurance coverage. Further, lease contracts generally require that you carry collision and comprehensive at all times.
• If your car is totaled, or stolen, carefully follow all requirements made by your auto insurance company. Some companies require you to continue making loan payments on your totaled car until the money from the gap insurance is paid out.