Do I Have to Buy Gap Insurance From the Dealer in Texas?

Vehicles on a dealership showroom floor in Texas.

Summary: Gap insurance is available through dealerships and carriers alike, however, dealers often offer coverage that costs much more due to interest. Standalone options are also available offering protection with competitive rates and dealership coverage may also require you to cover a deductible. Keep in mind dealerships typically allow a 30-day cancellation with a full refund, though fees may apply later. Military members can still purchase gap insurance despite past confusion about its coverage under the Military Lending Act (MLA). To save money, compare quotes from multiple insurers based on your specific coverage needs.  Estimated Read Time: 4 mins

Table of Contents:

  1. What Is Gap Insurance Through a Dealership in Texas?
  2. How to Purchase Gap Insurance Through a Dealership in Texas
  3. Should I Get Gap Insurance From a Dealer or Insurance Company in Texas?
  4. How Much Is Gap Insurance Through a Dealership in Texas?
  5. Why Is Active Military Denied Gap Insurance in Texas?
  6. Can You Cancel Gap Insurance Through a Dealership in Texas?

 

Gap insurance can be purchased from a car dealer or your auto insurance provider. While it’s usually optional when financing a car, some lenders may require it, and when leasing a vehicle, the coverage may also be mandatory.

Dealerships may offer this protection during the purchase process, but adding gap coverage to your auto insurance policy might be more affordable.

In some cases, lenders include a gap waiver in the loan or lease agreement, eliminating the need for separate coverage.

To avoid overpaying, compare prices from both the dealership and your insurance provider and enroll in the policy offering the most production at the lowest price.

What Is Gap Insurance Through a Dealership in Texas?

Gap insurance is available through your auto insurer or car dealership. While dealerships often include the coverage when you buy a car, you can choose to decline it.

Some insurers offer gap insurance as a standalone policy, but it’s typically added to your existing auto insurance in Texas.

In some cases, lenders may include a gap waiver in your car loan or lease, providing similar coverage.

Leased Vehicles

Many lessors require gap insurance for leased cars to protect against financial loss if the vehicle is totaled or stolen but it varies. Check your lease agreement to see if it’s mandatory under your specific terms.

However, even when it’s optional, gap insurance is worth considering—especially if you made a small down payment, have a long lease term, or are leasing a luxury car that depreciates quickly.

If you’re paying for dealership-provided coverage, compare prices with your auto insurer—you might save money by switching from dealership coverage as these policies often cost more.

Regardless, be sure to provide proof of coverage if needed for your lease.

If you owe less than the car’s actual cash value (ACV), gap insurance may not be necessary. Before canceling or skipping coverage, check with your lessor to avoid potential issues.

How to Purchase Gap Insurance Through a Dealership in Texas

Dealers typically offer gap insurance when you finance or lease a car, but it can be costly if added to your loan due to interest rates.

Buying gap insurance from your auto insurer is often more affordable and is provided interest-free.

You can add this production to a new or existing policy as long as your loan or lease isn’t fully paid off.

Keep in mind that comprehensive and collision coverage is required to qualify for gap insurance.

Should I Get Gap Insurance From a Dealer or Insurance Company in Texas?

For most drivers, it’s best to avoid buying gap insurance from a car dealership unless no other option fits your needs.

Dealership gap coverage typically costs between $400-$700 plus loan interest, while auto insurers only charge between $20-$40 per year or about 6% of your collision and comprehensive premium.

If your insurer doesn’t offer gap insurance, standalone providers sell policies starting at a couple of hundred dollars.

Since gap coverage is typically only needed for a few years, dealership plans are rarely worth the extra cost.

Below are the pros and cons of purchasing a gap policy from a dealer in Texas rather than an auto insurance carrier:

Pros and Cons of Dealer Gap Insurance

pros-and-cons-of-gap-insurance-through-dealership-in-texas

How Much Is Gap Insurance Through a Dealership in Texas?

Standalone gap insurance from a Texas dealership costs $500 to $1,500 and is capped at 5% of your loan’s value.

It’s not required by law and can’t be a loan or lease condition. If you purchase a gap waiver, its cost is also limited to 5% of the loan or lease value.

Furthermore, you have 30 days to cancel the waiver for a full refund. Always review the agreement for key details like cost, term, and claims process, as well as how to file a claim and cancel for a refund if needed.

Remember, every driver has differing personal factors ranging from the amount of coverage they require to their driving record and much more. All of these variables will affect how much you pay for coverage.

Comparing different policies from multiple carriers is the best way to save on your gap insurance policy.

Why Is Active Military Denied Gap Insurance in Texas?

Military members can purchase gap insurance through dealerships, lenders, or insurance companies, however, there has been confusion surrounding unclear rules under the Military Lending Act (MLA) for service members.

The MLA caps interest rates for active-duty military members and families but doesn’t apply to vehicle loans.

Because it was unclear if financing gap insurance under an auto loan brought it under MLA protections, some lenders avoided offering the protection to service members to sidestep potential restrictions.

However, a federal court ruled gap insurance financing is not protected under the MLA, clarifying that auto lenders can finance the protection for military members without violating the law.

Gap insurance remains available for military members in most states despite past misunderstandings.

Can You Cancel Gap Insurance Through a Dealership in Texas?

Dealers often offer a 30-day cancellation period for gap insurance, during which you can receive a full refund.

However, after the cancellation period, you’ll still need to pay any overdue amounts, including interest. Review your agreement and contact your dealer for details.

If you are canceling gap insurance through a dealership, be sure to have the right coverage in place before doing so to avoid lapses in coverage.

Compare top-rated carriers and find the lowest rates for auto insurance in Texas by using our free, no-obligation tool below or ask an agent today:

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