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.
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Written byMelanie Lockert
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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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Edited bySarah Archambault
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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 November 21, 2024
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Table of contents
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
| User Reviews | 4.0 |
|---|---|
| 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. | $53/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. | $98/mo |
4.0
Best choiceBased on 5648 verified guest reviews and ratings
How drivers feel about Allstate
Drivers appreciate the initial pricing and overall service but dislike the frequent rate increases and misleading pricing tactics.
AI-generated from the text of verified reviews collected by Insurify
Best For
Accident forgiveness
Wide availability
Cheap rates
How drivers feel about Allstate
Drivers appreciate the initial pricing and overall service but dislike the frequent rate increases and misleading pricing tactics.
AI-generated from the text of verified reviews collected by Insurify
Best For
Accident forgiveness
Wide availability
Cheap rates
Reviews (3,073)
Rodney
November 20, 2024
Verified Review
Lower Insurance
The insurance is too high.
Lyudmila
November 14, 2024
Verified Review
No Discount for Seniors
The service is mediocre.
Latonya
November 12, 2024
Verified Review
Not Recommended
I would not recommend Allstate. They did not support me when I needed them most. They didn't believe me or the other party when we said my first accident wasn't my fault. My agent incorrectly reported to the DMV that my insurance had lapsed when it hadn't. They increased my insurance rates four to five times within two years. A representative from my agent's office called me to sell renters insurance, promising a lower monthly rate, which turned out to be false. After I was involved in a hit and run, instead of ensuring my wellbeing, they raised my insurance again to almost $800/month. I find Allstate to be a disappointing car insurance company and I wouldn't recommend them to anyone.
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
833NAIC Index
Average amount of customer complaints relative to competitors on a 0-5 scale. A lower score represents fewer complaints.
0.94A.M. Best
A.M. Best analyzes an insurer’s financials, operating performance, business profile, and other factors to generate an opinion-based rating of a company’s financial and credit strength. Ratings range from A++ (exceptional) to D (poor).
A-Why we picked this company
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
Ample opportunities for bundling discount
Offers a pay-per-mile option
A+ (Superior) financial strength rating from AM Best
Cons
Low customer satisfaction
Rates are merely average compared to other insurers
Below-average rank for customer satisfaction in many regions, according to J.D. Power’s 2024 U.S. Auto Insurance Study
Nationwide
| User Reviews | 4.4 |
|---|---|
| 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. | $84/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. | $155/mo |
4.4
Best choiceBased on 782 verified guest reviews and ratings
How drivers feel about Nationwide
Drivers appreciate the excellent coverage, reliable claims process, and good initial rates but dislike the frequent price increases.
AI-generated from the text of verified reviews collected by Insurify
Best For
Usage-based savings
Accident forgiveness
Recreational vehicle coverage
How drivers feel about Nationwide
Drivers appreciate the excellent coverage, reliable claims process, and good initial rates but dislike the frequent price increases.
AI-generated from the text of verified reviews collected by Insurify
Best For
Usage-based savings
Accident forgiveness
Recreational vehicle coverage
Reviews (441)
Richard
November 7, 2024
Verified Review
Excellent Company
Nationwide appears to be an excellent company. I have recommended this company to several of my friends. My daughter and her husband have also taken out policies and are very satisfied with this company. Thank you.
Irene
November 4, 2024
Verified Review
Sorry to be leaving you, Nationwide.
I used Nationwide for 32 years. I understand that insurance prices are going up, however, due to my limited income, I can no longer afford to stay with Nationwide.
Sara
November 1, 2024
Verified Review
Very Good!
The customer service is very good. They explain things well and make it easy to understand.
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
815NAIC Index
Average amount of customer complaints relative to competitors on a 0-5 scale. A lower score represents fewer complaints.
0.64A.M. Best
A.M. Best analyzes an insurer’s financials, operating performance, business profile, and other factors to generate an opinion-based rating of a company’s financial and credit strength. Ratings range from A++ (exceptional) to D (poor).
A+Why we picked this company
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
Offers 24/7 roadside assistance coverage add-on
SmartRide (for safe drivers) and SmartMiles (for low-mileage drivers)
Accident forgiveness available
Cons
Below-average customer satisfaction scores from J.D. Power
Some discounts and programs not available in all states
Not available in every state
Liberty Mutual
| User Reviews | 3.7 |
|---|---|
| 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. | $200/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. | $328/mo |
3.7
A solid optionBased on 2671 verified guest reviews and ratings
How drivers feel about Liberty Mutual
Drivers appreciate the initial low prices, quick claims handling, and easy account access but dislike the significant price increases over time.
AI-generated from the text of verified reviews collected by Insurify
Best For
Numerous discounts
New and financed vehicles
Accident forgiveness
How drivers feel about Liberty Mutual
Drivers appreciate the initial low prices, quick claims handling, and easy account access but dislike the significant price increases over time.
AI-generated from the text of verified reviews collected by Insurify
Best For
Numerous discounts
New and financed vehicles
Accident forgiveness
Reviews (1,559)
Michael
November 19, 2024
Verified Review
Go Elsewhere
The customer service is poor. It's difficult to speak to a human as it's overly automated.
Deborah
November 12, 2024
Verified Review
Examine Every Inch of Your Policy
I didn't realize I didn't have accident forgiveness until my daughter had an accident. They tripled the cost of my policy.
Lee
November 12, 2024
Verified Review
Ugh!
The rates increase every year. I'm an excellent driver and I've never made a claim.
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
819NAIC Index
Average amount of customer complaints relative to competitors on a 0-5 scale. A lower score represents fewer complaints.
3.95A.M. Best
A.M. Best analyzes an insurer’s financials, operating performance, business profile, and other factors to generate an opinion-based rating of a company’s financial and credit strength. Ratings range from A++ (exceptional) to D (poor).
AWhy we picked this company
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
Available in all 50 states and D.C.
Cons
Many negative reviews and customer complaints
Premiums are relatively high compared to industry average
Low customer satisfaction scores from J.D. Power
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Best Car Insurance Companies in Texas (November 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.
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More cities in Texas
Sources
- Edmunds. "July Car Loan Rates (APR) in the U.S. for Used and New Cars."
- Insurance Information Institute. "What is gap insurance?."
- Insurance Information Institute. "What is covered by a basic auto insurance policy?."
- Texas Department of Insurance. "Do you need gap insurance for your car? How does it work?."
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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.
Edited bySarah 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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