Gap Insurance in Texas (2024)

Gap insurance is an add-on that covers the difference between the amount you owe on a financed vehicle and what your insurer pays in case of a total loss.

Melanie Lockert
Written byMelanie Lockert
Melanie Lockert
Melanie Lockert
  • 10+ years writing on personal finance topics

  • Host of the Mental Health and Wealth podcast

Melanie is a blogger, author, and speaker specializing in personal finance and debt management. She’s also the author of the blog and book “Dear Debt.”

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Sarah Archambault
Sarah Archambault
  • Experienced personal finance writer

  • Background working with banks and insurance companies

Sarah enjoys helping people find smarter ways to spend their money. She covers auto financing, banking, credit cards, credit health, insurance, and personal loans.

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Updated October 30, 2024

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Cheapest recent rates in Texas

Drivers using Insurify have found quotes as cheap as $36/mo for liability only and $59/mo for full coverage in Texas.

*Quotes generated for Insurify users from Texas within the last 10 days. Last updated on October 30, 2024

Rates shown are real-time Insurify user quotes from 100+ insurance companies and Quadrant Information Services data. Insurify’s algorithm excludes anomalous quotes and anonymizes personal details, then displays refined quotes by price, date, and insurer popularity up to 10 days ago from October 30, 2024. Actual quotes may vary based on the policy buyer’s unique driver profile.

*Quotes generated for Insurify users from Texas within the last 10 days. Last updated on October 30, 2024

Rates shown are real-time Insurify user quotes from 100+ insurance companies and Quadrant Information Services data. Insurify’s algorithm excludes anomalous quotes and anonymizes personal details, then displays refined quotes by price, date, and insurer popularity up to 10 days ago from October 30, 2024. Actual quotes may vary based on the policy buyer’s unique driver profile.

With rising auto loan interest rates, drivers in Texas pay some of the highest interest rates in the U.S. Recent Edmunds data shows that 25.2% of Texas drivers pay more than $1,000 per month to finance their new car.[1]

With these high costs and vehicle depreciation, Texas drivers who finance or lease a vehicle could be on the hook financially after a total loss if an insurer’s payout doesn’t cover the remaining loan balance. Gap insurance, or guaranteed asset protection, helps drivers cover that financial gap.

Quick Facts
  • You can add gap insurance to most full-coverage policies.

  • The national average for gap insurance is $213 per month for full coverage.

  • Gap insurance is typically available from insurance companies, lenders, or dealers.

How gap insurance works

When you finance or lease a vehicle, you’re in a financial agreement with a creditor and are responsible for monthly payments. But while you’re paying down the loan or keeping up with the lease, your car loses value quickly thanks to depreciation.

If you’re a car theft victim or involved in an accident with a total loss of your vehicle, your auto loan or lease doesn’t magically disappear. Collision coverage and comprehensive coverage often help cover some of the cost of replacing your vehicle.

But your insurance company will only pay the actual cash value of your car — an amount that’s often less than what you still owe on a loan or lease. You’ll still owe your lender or leasing company the full balance on your loan or lease.[2]

Gap insurance coverage ensures that you won’t have to pay any remaining balance on your auto loan or lease out of your own pocket. Also called payoff coverage, gap insurance pays out the difference between your loan amount and the current value of your car. That way, you’re not stuck making loan or lease payments on a totaled vehicle.

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What gap insurance covers in Texas

Gap insurance in Texas provides financial protection if you have an auto lease or loan, covering the “gap” between an insurance payout and what you owe a lender. The coverage only kicks in if someone steals your vehicle or your insurer declares it a total loss after an accident or other covered peril. So, if there’s a “gap” between the insurance payout and loan amount, this coverage helps pay the rest.

Here’s an example of how gap insurance can help protect you financially.

Let’s say you have a $30,000 auto loan. You get in an accident resulting in a total loss and file a claim with your insurance company. Given the actual cash value of your car, the insurance payout is $26,000, and you still owe $4,000 to the lender. If you have gap coverage, the remaining $4,000 would be covered after paying your deductible.

Without gap insurance, paying thousands of dollars out of pocket for a totaled car could hurt your finances and make it hard to get a replacement vehicle.

The good news is you don’t need to keep gap insurance forever. Once your loan amount drops below your vehicle’s actual value, you can cancel gap coverage.

What gap insurance doesn’t cover

Before signing up for gap insurance, it’s important to know that it doesn’t cover the following:

  • Your deductible

  • Damage to your vehicle if your insurer doesn’t deem it a total loss

  • Funds or down payment to purchase a new vehicle

  • Difficulty making loan payments

  • Unpaid fees or interest on your auto loan or lease

  • Rental car expenses

Read your gap insurance policy carefully or talk to an agent to make sure you understand your gap coverage and what exclusions may apply.

Best gap insurance companies in Texas

Texas drivers can choose from many different companies when shopping for auto insurance. But not all insurers offer gap insurance. Here are some of the top options if you want to get gap insurance in Texas based on rates, ratings, coverage, and discounts.

Allstate

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User Reviews
3.1
IQ Score
The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-ten scale. The Insurify editorial team researches insurer data to determine the final scores.
8.9/10
Liability Only
Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages.
$52/mo
Full Coverage
Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible.
$94/mo

Allstate offers gap insurance and has some of the lowest auto insurance rates in Texas. The company also offers plenty of discounts and coverage options.

Pros
  • Well-established with superior ratings from A.M. Best

  • Pay-per-mile option available

Cons
  • Low customer satisfaction

  • Rates are merely average compared to other insurers

Read more driver reviews of Allstate
Howard - October 29, 2024
Verified

They Have You By The Short Hairs

I was on a three-lane highway in heavy traffic and couldn't avoid a piece of metal in my lane. I couldn't swerve or I would have hit other cars. Allstate said the accident was the driver's fault and then doubled my insurance cost.

Hugh - October 29, 2024
Verified

Actual Crash Damages vs. Damages Quoted Over the Phone

There were problems getting the correct amount paid out when I made a claim. I had to escalate the issue to the Senior Vice President to get a proper settlement when a deer hit my truck. There was a $5000 difference between what was paid out when the estimator assessed the value of damage to my truck and the actual estimate done by a local car dealership. The Senior Vice President agreed that the amount of damage done was the amount quoted by the local car dealership.

Miriam - October 29, 2024
Verified

Best Overall

Check around before choosing. Allstate has been my choice for years.

Nationwide

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User Reviews
3.3
IQ Score
The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-ten scale. The Insurify editorial team researches insurer data to determine the final scores.
8.7/10
Liability Only
Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages.
$83/mo
Full Coverage
Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible.
$165/mo

Nationwide offers gap insurance in Texas and has competitive rates. With Nationwide, drivers can opt for specialty features like accident forgiveness and a vanishing deductible.

Pros
  • Numerous discount and savings opportunities

  • SmartRide (for safe drivers) and SmartMiles (for low-mileage drivers)

Cons
  • Not available in every state

  • Some discounts and programs not available in all states

Read more driver reviews of Nationwide
Ashley - October 29, 2024
Verified

Great company

Nationwide is a great company. I regret messing up with them!

Keirh - October 28, 2024
Verified

Unsatisfactory Service

I cancelled my insurance. Their rates are too high, they don't treat you properly, and they haven't refunded my money yet.

Earl - October 28, 2024
Verified

I was upset that I received a non-renewal letter over two issues that were resolved a year prior. My local representative resolved the issue quickly.

I was upset that I received a non-renewal letter over two issues that were resolved a year prior. My local representative resolved the issue quickly.

Liberty Mutual

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User Reviews
2.8
IQ Score
The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-ten scale. The Insurify editorial team researches insurer data to determine the final scores.
7.7/10
Liability Only
Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages.
$167/mo
Full Coverage
Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible.
$309/mo

Liberty Mutual is one of the best companies from which to get gap insurance in Texas, with lower rates than some other competitors. The company has been in business for more than 100 years and offers unique coverage options, such as original parts replacement and special discounts for teachers.

Pros
  • Wide range of available discounts

  • Accident forgiveness available

Cons
  • Many negative reviews and customer complaints

  • Premiums are relatively high compared to industry average

Read more driver reviews of Liberty Mutual
Frank - October 29, 2024
Verified

Been with them for 27 years, but I'm unsure

They are expensive. We are low mileage drivers with three cars, and only my wife and I are driving.

Gary - October 29, 2024
Verified

Price Gouging!

They recently increased my premium from $182 to $231 per month for no apparent reason, other than a general raise for everyone.

Donald - October 29, 2024
Verified

Don't use them, they will increase your rate within the six-month period of your term! And that's with no claims!

Don't use them, they will increase your rate within the six-month period of your term! And that's with no claims!
Best Car Insurance Companies in Texas (October 2024)

Best Car Insurance Companies in Texas (October 2024)

Gap insurance vs. full coverage

Gap insurance only covers the difference between your vehicle’s value and your insurance payout in the event of a total loss, like a theft or accident. Full-coverage insurance, on the other hand, protects you financially if you cause an accident, injuries, damage property, or vandalism, hail, or other covered perils damage your vehicle.[3]

Full-coverage insurance includes liability coverage, comprehensive coverage, and collision coverage. Gap insurance isn’t part of the coverage, but you can add it for an extra cost if the insurer offers it.

If you have full coverage, you only need gap insurance if you’re financing or leasing the car and the loan amount is greater than the vehicle’s value.

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Who needs gap insurance in Texas?

Texas law doesn’t require drivers to have gap insurance. But it’s not something you should immediately skip out on — especially if you finance or lease your vehicle.[4] Some situations in which it makes sense to get gap insurance include:

  • Your down payment was less than 20%.

  • You’re leasing your vehicle.

  • Your repayment term exceeds 60 months.

  • You rolled over negative equity into your new car loan.

  • The type of vehicle you drive depreciates more quickly.

Gap insurance products are only useful if your auto loan exceeds the car’s value. Once that switches and your loan amount is less than the car’s actual cash value, you can cancel your gap coverage.

You likely don’t need gap insurance if:

  • You own your vehicle outright.

  • You made a significant down payment.

  • Your remaining loan balance is less than the car is worth.

How to buy gap insurance in Texas

You can get gap insurance through the dealership or your lender. When you finance a car, the dealership or financial institution may offer you gap insurance. While this may seem like a convenient option, it’s often cheaper to buy coverage through your insurer.

Not all insurers offer gap insurance, but if this add-on coverage is available from your insurer, it’ll add about $20–$40 per year to your annual premium. Start by asking your insurance company if it offers gap insurance. If not, compare quotes from insurers that offer gap insurance in Texas.

Texas drivers can also purchase gap insurance as a stand-alone product from some insurers, but costs can range from about $200 to $300 per year. So it’s usually cheaper to add the coverage to an existing auto policy.

Gap insurance in Texas FAQs

If you’re considering getting gap coverage in Texas, here’s some additional information that may help you decide if this coverage is right for you.

  • Does Texas require gap insurance?

    No. The state of Texas doesn’t require you to get gap insurance. Lenders can’t require you to get gap insurance as part of the loan agreement, but they sometimes require it when you’re leasing a vehicle.

  • How do you file a gap insurance claim in Texas?

    Drivers with gap insurance coverage who have a qualifying event, like a stolen vehicle or total loss, must file a gap insurance claim. Contact your insurer or other gap insurance company for specifics on what’s needed to file a claim and if any deadlines or exceptions apply.

  • How much is gap insurance at a Texas car dealership?

    The cost of gap insurance in Texas at a car dealership can vary, but you may pay up to $700. When you purchase gap insurance at a car dealership, it’s generally more expensive than getting coverage from a credit union or insurer.

  • Who’s eligible to purchase gap insurance in Texas?

    Anyone can purchase gap insurance in Texas. But it’s generally only needed if you lease or finance your vehicle. Once you owe less on the vehicle than its actual cash value, you can drop gap insurance coverage.

Sources

  1. Edmunds. "July Car Loan Rates (APR) in the U.S. for Used and New Cars."
  2. Insurance Information Institute. "What is gap insurance?."
  3. Insurance Information Institute. "What is covered by a basic auto insurance policy?."
  4. Texas Department of Insurance. "Do you need gap insurance for your car? How does it work?."
Melanie Lockert
Melanie Lockert

Melanie Lockert is the founder of the blog and author of the book, "Dear Debt." Through her blog, she chronicled her journey out of $81,000 in student loan debt. Her work has appeared on Allure, Business Insider, Credit Karma, Fortune, and more. She is also the co-founder of the Lola Retreat and host of the Mental Health and Wealth show podcast. She lives in Los Angeles and enjoys jazz music, traveling, coffee, and spending time with her two cats and partner.

Sarah Archambault
Sarah Archambault
  • Experienced personal finance writer

  • Background working with banks and insurance companies

Sarah enjoys helping people find smarter ways to spend their money. She covers auto financing, banking, credit cards, credit health, insurance, and personal loans.

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