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How Do Gap Insurance Claims Work in Texas?

If your insured car is stolen or totaled in Texas, and the payout from the insurer does not cover your debt to the bank, gap insurance takes care of the overage, after your comprehensive or collision insurance has covered your totaled or stolen car. Gap insurance protects you from bearing the liability of paying the difference between the actual cash value covered by your comprehensive or collision auto insurance and the loan balance.

As the named insured, you must notify your insurer about the loss and file a claim with all necessary documents like a police report, valuation report, and loan contract. Each insurer has varying rules for how claims should be filed. However, the most common methods include via mail, email, online, or in person. The insurer has to investigate and process the claim within 15 days of receiving the claim. In the end, the insurer will either reject or approve the claim depending on its validity. If the claim is valid, the insurer will take steps to pay the claim, usually to the lender. The gap insurance claim payout settles what is left on the debt, leaving you debt-free. However, if the insurer rejects the claim, they must provide you with valid reasons for the rejection. Where there is genuine rejection, you will be liable for paying back the loan to your lender without your insurer.

When you need to file a gap insurance claim, it is best to speak to a Texas-licensed insurance agent to help you through the process. As such, you should ask your agent the following questions:

How Do I File a Claim for Gap Insurance in Texas?

You can file a gap insurance claim after your insurance provider has settled either your collision or comprehensive claim. The first thing to do is to inform the insurer and provide the necessary documentation to prove the car’s value and other important details. The documents you need for filing gap insurance claims include the following:

Auto Insurance Company:

If you purchased your gap insurance from an insurance company, you would need the following documents when filing a claim:

  • Vehicle valuation report: the insurer uses this report to determine the vehicle’s actual cash value. It will include the make of the car, year, mileage, and other packages in the car
  • Police report: if the car was stolen or totaled, you would be required to provide a copy of the crash report or theft report. The local law enforcement agencies called to the loss scene would usually file one
  • Total loss worksheets: this includes the actual cash value, administrative fees, deductibles, and the final claim payment
  • Copy of the total settlement check given by the insurer for the total loss
  • Declarations page: the front page of the policy that specifies the coverage information on the covered car


If your gap insurance is purchased from a car dealer, you would need the following documents when filing a claim:

  • Financing contract: this shows the financing terms and other relevant products you purchased under the gap insurance policy, like service contacts and maintenance
  • Loan history: your complete loan history, which shows all the payments you have made and other interest charges on your loan account. The most important part is the loan balance reflected on the statement
  • MSRP/NADA at purchase: a copy of the Manufacturer's Suggested Retail Price (MSRP) if the car was bought new or National Automobile Dealers Association (NADA) if your vehicle is used
  • Buyers order: this includes the bill of sale, purchase agreement, or sale contract executed between you and the dealer or lender


If you purchased gap insurance as part of the loan directly from the lender, contact your financial institution for details.

Although these are the most common requirements, certain insurers, dealerships, or other lenders may provide further instructions when filing a gap claim. You can file your gap insurance claim in person at the physical location of your insurance provider, over the phone, or online. You can also get a list of the documents you need to file a claim through your insurer’s website or over the phone.

You can contact your licensed insurance agent in Texas when you need to file a gap insurance claim to guide you through the process.

How Long Do I Have to File a Gap Insurance Claim in Texas?

In Texas, you have two years from the time of the accident to file a claim with your insurer. Ensure you file your claim within the limitation period stipulated under the law; failure to do so means you are waiving your right to a claim. This is why you must read the fine print of your insurance contract to know when you must file a gap insurance claim. You can also ask your Texas-licensed auto insurance agent if you have questions about the gap insurance claims process.

What Happens After I File a Claim With My Gap Insurance in Texas?

After you file a claim, your insurer will investigate the claim before paying out. The investigation will determine your eligibility for the gap insurance claim payout. If your insurer accepts the claim, your insurer, dealership, or lender will make plans to pay the claims. However, if your gap insurance provider rejects your claim for valid reasons, you will bear the cost repayment of the unpaid portion of the loan. You may appeal a rejection if you genuinely feel that your plan should cover it.

Ensure you provide all necessary information to substantiate your claim with your insurance provider. If you need help with what information to provide, contact a Texas-licensed insurance agent for free.

How Do Gap Insurance Companies Pay Out Claims in Texas?

Gap insurance providers will only pay out if the car is totaled or stolen. This means the insurance company must declare that the vehicle is a total loss and approve your comprehensive or collision claim before the gap insurance coverage takes effect. The insurer will use all the documents submitted by the insured to evaluate the claim and use their insurance actuaries to investigate the claim. If the claim is legitimate and the car is declared a total loss, the insurance company will take the necessary steps to pay out the claim. It is noteworthy that certain insurance companies limit the amount your gap insurance policy will pay, which is 25%, known as loan/lease coverage. The insurance company will then send the claim via the mode of payment stipulated in the policy, which is usually a check or bank transfer.

Can a Gap Insurance Company Refuse to Pay a Claim?

Yes, a gap insurance company can refuse to pay your claim when you file one if their investigation shows that there is an issue with the claim. In such a case, the insurance company is required to provide you with legitimate reasons for refusing your claim. If your insurance company refuses to pay without any legitimate grounds, you can take the following steps:

  • Contact the insurance company to inquire about the reason for the refusal. If you are unsatisfied with the reason, you can file a formal appeal through the Office of the Attorney General's Consumer Protection Division
  • If you are not satisfied with the complaint resolution, you can file a private lawsuit at a small claims court or mediation program
  • File a lawsuit in the civil court if the money due exceeds the jurisdiction of the small claims court

Even though insurance companies have the right to refuse a claim payout, you can still look through the terms and conditions of your gap insurance policy and can contact your insurance agent for further help regarding any difficulties experienced during the claims process.

Why Do Gap Insurance Companies Deny Insurance Claims?

If the insurance provider denies your comprehensive and collision insurance claim, your gap insurance claims will also be denied. This means gap coverage will not cover the outstanding loan amount. Unless the insurance company declares the car a total loss, the gap insurance coverage cannot kick in. The insurance company will deny your claim if your vehicle only needs repairs or you fail to pay your premium.

What Are the Top Reasons a Gap Insurance Claim Might Be Denied For Payment in Texas?

The primary reason an insurer will deny a claim is if the accident or loss is not declared a total loss to guarantee a gap insurance claim. Other credible reasons an insurer may deny a claim include the following:

  • The insured violated the law by dropping their auto liability insurance coverage as required by the law
  • The insured failed to report the incident within the time stipulated in the policy
  • The insured provided false and misleading information to the insurer
  • The insured's policy doesn’t cover the date, time, and accident circumstances
  • The policy has expired, or the insurance provider has canceled the policy due to non-payment by the insured
  • The insured jeopardized the investigation by failing to provide the claim report and other information
  • The at-fault accident is excluded from coverage because it was an intentional act or the car was used for commercial purposes when it was not registered as one

How Much Does Gap Insurance Pay Out?

Gap insurance providers will pay out the difference between the car’s actual cash value and what is still left on the loan debt. Most of the time, the providers will send the check directly to the loan provider within 5 to 45 days of accepting to pay the claim.

What If My Insurance Isn’t Paying Enough For My Claim?

If your gap insurance provider is not paying enough for your claim, you need to speak to your insurance provider to try and resolve the issue. If your situation is still not resolved, you can request an appraisal. The appraisal process works by having two appraisers review a claim and decide on the coverage amount. However, you can contact your Texas-licensed insurance agent for help if you need help resolving the issue. If you believe that your insurer is not paying enough for your filed claim, you can also file a complaint with the Texas Department of Insurance using their online complaint system. The TDI cannot guarantee the outcome of the resolution; as such, you can file a legal action in the relevant Texas Court. You can use the lawyer referral services of the State Bar of Texas to find active lawyers near you.

How Long Can a Gap Insurance Company Investigate a Claim in Texas?

After filing a claim, a gap insurance provider has five to 45 days to pay a policyholder. Note that the insured car must be declared a total loss to get a gap insurance claim payout, and the insurance company needs to accept the claim. So the insurer must respond within 15 days of receiving the notice of the claim they are filing. During these 15 days, the insurance company must acknowledge notice of the claim filed by the insured. Failure to acknowledge notice is a violation of the Texas Insurance Code. The insurer must commence an investigation into the claim and other supporting documents. Usually, the insurance company will use insurance actuaries to investigate and rely on the insured’s relevant information.

Complicated issues like an accident involving more than one driver, medical bills, and unclear fault determination may take longer to investigate. The insurance provider will have within 30 days to declare the covered car a total loss after the initial filing of the claims. However, sometimes the investigation may require extra work to settle, and the insurer may need to extend the investigation by up to 45 days. If the reason for the extension is unfounded, the insurer has to approve or deny the claim.

You can make the claims process faster by doing the following:

  • Be well-versed with the policy or the loan contract
  • Send all documents necessary for the claim within a reasonable time to the insurer
  • Submit a well-detailed proof of loss form to make the investigation easier for the insurer
  • Contact a Texas-licensed insurance agent who can help you understand your options during the claim process

When the car is declared a total loss, and the provider has agreed to pay the gap insurance claim, the provider will begin the claim payout process. Since the gap covers the difference between the actual cash value and the loan balance, it will be sent to the lender.

How Can I Check The Status of My Gap Insurance Claim?

You can contact your gap insurance provider to inquire about your gap insurance claim status. Alternatively, you can utilize any secured online platform provided by your insurance company to track the status of your claim. Your best option is to speak to your agent licensed to offer insurance services in Texas.

Do I Need To Tell My Gap Insurance Company If The Car is Not Totalled?

No, you do not need to inform your gap insurance company if your car is damaged but not totaled. A provider will only pay out a claim if the covered vehicle is declared a total loss. This means that if your vehicle needs only a repair or replacement part, your gap insurance coverage cannot protect you.

When Not To File a Gap Insurance Claim?

You do not need to file a gap insurance claim if you have settled your loan debt. You should also drop your gap insurance if you can cover the difference between the actual cash value and the loan balance. Likewise, if the covered car requires only repairs or replacement of car parts, you may not need to file a gap insurance claim.

However, before deciding not to file a claim, speak to an insurance agent licensed in Texas for proper guidance.