(800) 253-1482When Does Gap Insurance Not Pay in Texas?
Summary: Gap insurance only pays if your car is declared a total loss, not for repairable damage, and it won’t cover issues like liability, maintenance, or mechanical failures. Many policies cap payouts at 125% of the car’s value, leaving you responsible for any loan balance beyond that. Claims may be denied if your policy lapses, you owe money on a previous loan, or the damage was intentional or pre-existing. Estimated Read Time: 5 mins
Table of Contents:
- Reasons Gap Insurance Won’t Pay Your Claim in Texas
- Can Gap Insurance Deny Claims in Texas?
- How Do You File a Claim With Gap Insurance in Texas?
If you have gap insurance, you’re protected financially from paying off your note if your vehicle is totaled or stolen but there are several instances in which your coverage won’t pay out your claim. A frustrating reality for some drivers in Texas, learn more below about when gap insurance does not pay, how to avoid these issues, and what you can do to ensure your claim goes through.
Reasons Gap Insurance Won’t Pay Your Claim in Texas
Car insurance in Texas comes in all shapes and sizes, including gap insurance for covering the balance of your note after an accident.
It’s a useful way to protect your finances, but your claims aren’t always paid if they don’t meet the guidelines of your policy.
If you’re upside down on your loan, gap coverage protects you but if you aren’t current on your premiums, commit fraud, allow your policy to lapse, and commonly, if your vehicle simply isn’t totaled, don’t expect reimbursement.
Furthermore, gap insurance policies often come with waiting periods before protection begins, meaning, if you suffer a loss during this time, you won’t be covered. Here are the exclusions to gap insurance claims:
Your Car Isn’t Totaled
When gap insurance is not paying the full amount, it’s often because the vehicle isn’t declared as totaled.
A total loss is when it costs more to fix your car than to replace it and if your vehicle doesn’t fit this criteria after a wreck, your gap insurance claim won’t go through.
Claims Unrelated to Your Vehicle’s Balance
Remember, there are plenty of different types of auto insurance, each working to protect your vehicle from specific perils.
Gap insurance isn’t a substitute for liability, or collision, or comprehensive coverages—in other words, your policy won’t cover bodily injury or property damage for any party.
Optional coverages like maintenance or extended warranties, often rolled into loans, also aren’t covered by gap coverage, nor is wear and tear, or mechanical failures.
Your Policy Limits Aren’t High Enough
Most insurers cap gap coverage at a percentage or dollar limit, often up to 125% of the car’s actual cash value (ACV). If your loan exceeds this, you’ll pay the difference.
Additionally, if your car’s value drops due to non-totaling damage, gap insurance won’t cover the reduced payout if the car is later totaled.
Your Policy Lapses
Gap insurance won’t cover missed payments or fees if you fall behind due to disability, death, injury, or unemployment. It also won’t pay if your policy was inactive when the car was totaled, whether canceled by you or the insurer.
Just like any other type of coverage, it’s best to stay current on your premium. However, coverage may still apply if the policy is canceled after the accident.
You Owe Money on Another Loan
If you still owe money on another loan or lease, you can roll the money over for your new vehicle’s policy, however, in most cases, gap insurance won’t pay off the balance of the extra costs of the negative equity if you submit a claim.
Intentional or Previous Damage
Gap insurance won’t cover intentional damage or fraud, so claims involving these are excluded.
Fraudulent claims can lead to denied coverage, canceled policies, and trouble finding new insurance.
Pre-existing damage from before you added your coverage also isn’t covered, which is why adding gap insurance after an accident won’t help you retroactively.
Coverage applies only to qualifying losses, similar to standard insurance policies.
Be honest when filing claims to avoid complications and ensure valid coverage and remember, each policy is unique for the driver. It’s important to review your policy to understand exactly what it includes and excludes.
Can Gap Insurance Deny Claims in Texas?
As mentioned above, there are several instances when does gap insurance not pay in Texas, including exclusions like mechanical failure, wear and tear, or losses not covered by standard auto policies.
Keep in mind that gap insurance claims can also be denied if you’re driving under the influence and policy caps may also limit your protection.
Understanding your policy details is key; read your coverage terms and clarify with your insurer to avoid surprises.
Policy exclusions and conditions highlight the importance of maintaining good driving habits and staying informed about coverage specifics.
How Do You File a Claim With Gap Insurance in Texas?
File a gap insurance claim by phone, online, or in person, depending on your provider.
To begin the process, gather and provide the documents proving your loan or lease balance versus the car's value.
This includes an insurance settlement statement showing the vehicle’s cash value and reimbursement.
Drivers should also include the settlement check issued to their lienholder and the original loan or lease contract.
Submitting a detailed loan history with the current balance and a police report detailing the incident is also helpful.
Finally, be sure to attach the original sales agreement for the car to complete your claim documentation.
If you’d like to simplify the process, purchasing gap insurance through the same company that covers your comprehensive coverage can help and even lead to discounts.
Drivers in Texas can save money and hassle by comparing multiple carriers for the right protection, customer service, and lowest cost.
Avoid gap insurance claims not being paid off and save by enrolling with a top-rated carrier. Use the auto insurance quote below or ask an agent to find the right protection at the lowest price:
