Gap Insurance: Can You Cancel Auto Coverage?

Yes, you can cancel auto gap insurance. However, it's important to note that there may be certain conditions attached to cancelling your policy and receiving a refund. For instance, if you have a leased vehicle, your leasing company may require you to keep your gap coverage. Additionally, you may be charged a cancellation fee, depending on the timing and terms of your policy.

Gap insurance is an extension of your auto insurance that covers the difference between the actual cash value of your car and what you owe on your loan in the event of a total loss. While it can offer peace of mind, you may decide to cancel it due to the extra cost.

If you want to cancel your gap insurance, you'll need to contact your insurer or the company providing coverage, such as the dealership where you purchased your car. You may need to fill out a cancellation form and provide relevant documentation. It's important to review the terms and conditions of your policy before cancelling to understand any potential fees or refunds you may be entitled to.

Cancelling auto gap insurance: a step-by-step guide

Cancelling your auto gap insurance is a straightforward process, but there are a few things to consider before you begin. Firstly, it's important to note that gap insurance covers the difference between the actual cash value of your car and what you owe on your loan. This type of insurance is particularly useful for new vehicles financed or leased, as it can protect you in the event of a total loss.

Things to consider before cancelling:

Before cancelling your gap insurance, it's important to review the terms and conditions of your policy. There may be a cancellation fee, especially if you cancel within the first few days or weeks of purchasing the policy. Some insurers will charge up to 50% of your premium if you cancel within 60 days. Additionally, if you still owe money on your vehicle, cancelling your policy could leave a gap in coverage.

Step-by-step guide to cancelling:

• Review your policy: Check the terms of your policy to understand if and how you can cancel your gap insurance. There may be specific requirements or conditions that you need to meet in order to cancel.
• Purchase a new policy (if applicable): If you are cancelling your current policy because you are switching insurance providers, ensure that your new policy is ready to go before cancelling your existing one. This will help you avoid any lapses in coverage.
• Contact the insurance company, lender, or dealership: Depending on who you purchased your gap insurance from, you will need to contact the relevant party to initiate the cancellation process. They will be able to provide you with the necessary forms and documentation.
• Gather all necessary information and documents: When cancelling your gap insurance, you may be required to provide proof that your car has been sold, traded, or that your loan has been paid in full. Other documents may include verification of your car's mileage and a payoff letter detailing your remaining gap insurance balance.
• Fill out and submit all forms: Complete and submit all the necessary cancellation and refund request forms. If you have any questions, don't hesitate to contact the insurance company or a broker for assistance.
• Receive confirmation of cancellation and refund: Once your insurance company has processed your request, they will cancel your coverage and issue a refund for any unused portion of your policy. The refund may be sent via cheque or direct deposit, and the process can take a few days to several weeks.

Remember, it is your right to cancel your gap insurance policy at any time, but there may be fees or penalties involved, depending on the timing and terms of your policy. It is always a good idea to carefully review your policy and consult with a licensed insurance professional before making any decisions.

When to cancel auto gap insurance

Yes, you can usually cancel gap insurance if you no longer need it. However, there are certain scenarios in which it is recommended to keep it.

You can cancel your auto gap insurance when your loan amount drops below the value of your car. This typically happens after about two years of payments. You can also cancel your gap insurance if you pay off your loan early, or trade or sell the vehicle.

If you still have an outstanding balance on your auto loan and are considering cancelling your gap insurance, it is recommended that you think twice. Gap insurance provides great protection in the event your car is declared a total loss by an insurance company after an accident. On certain imported vehicles and heavy-duty trucks, this can amount to thousands of dollars of protection for a relatively low price.

If you are selling or trading in your vehicle, it makes sense to cancel gap coverage. However, if you have a loan balance that is greater than the trade-in/wholesale value of your vehicle, it is recommended that you keep the gap coverage until the balance is lower or the loan is paid off altogether.

How to cancel auto gap insurance

Yes, you can cancel auto gap insurance, but there are a few things you should consider before doing so. Firstly, you may be charged a cancellation fee, even if you cancel the policy within the first few days of purchasing it. This fee can be as high as 50% of your premium if you cancel within 60 days, so be sure to ask your insurer about any cancellation fees and how much they will be. Secondly, if you still owe money on your vehicle, cancelling your gap insurance policy could leave a gap in coverage if your car is totalled or stolen. In this case, the insurance payout may not cover the balance of what you owe.

If you still want to cancel your auto gap insurance, here is a step-by-step guide:

• Contact your insurer or the dealership where you bought your car, depending on where you purchased the coverage.
• Ask them to cancel your gap insurance and issue a refund for any unused coverage.
• Be prepared to provide information and documents such as proof that your vehicle was sold, traded, or paid off, and verification of your car's current mileage.
• Fill out and submit any documentation or forms required by your insurance company to complete the cancellation.

Keep in mind that if you purchased gap insurance through an insurance company, you may be able to cancel online. However, if you bought it through a dealership, you will likely need to contact them directly and may need to sign a cancellation form and other documents. The process for cancelling and obtaining a refund (if applicable) may vary depending on your provider and the type of policy you have.

Reasons to cancel auto gap insurance

Gap insurance is an optional form of insurance that covers the difference between the actual cash value of a car and the loan amount owed on it. While it can be a valuable form of protection for car owners, there are several reasons why one might choose to cancel their auto gap insurance.

High cost

The additional cost of gap insurance on top of regular car insurance premiums can be a burden for car owners, especially if the gap insurance was purchased through a dealership, which tends to be more expensive than buying it through an insurer.

No longer needed

As a car's value depreciates over time, gap insurance may no longer be necessary. If the loan balance is less than the car's value, gap insurance may not be worth keeping, as it is only valuable when you owe more than the car is worth.

Switching providers

If a car owner finds a better deal on gap insurance from another provider, they may choose to cancel their current policy and switch to the new provider. This could result in cost savings or better coverage.

Selling the vehicle

When a car owner sells their vehicle, they no longer need gap insurance for it, and can therefore cancel the policy.

Lowering insurance premiums

Some car owners may choose to cancel their gap insurance to lower their overall insurance premiums and save money, especially if they feel the added protection of gap insurance is unnecessary.

Paid off the loan

If a car owner has paid off their auto loan or reduced the balance to less than the car's actual cash value, they may no longer need gap insurance, as the risk of owing money on a totalled car is eliminated.

It's important to note that while gap insurance can be cancelled at any time, there may be cancellation fees involved, and car owners should carefully review their policy and consider the potential risks of cancelling before making a decision.

Refunds for auto gap insurance

You can get a refund for your auto gap insurance if you've paid for your coverage upfront and cancel before the end of the policy period. Gap insurance refunds are most commonly issued after a loan is paid off early, or the car is sold or traded in.

The amount of the refund will depend on how you paid for the policy. If you paid upfront, you will get back any unused premium. If you pay monthly, your refund will be smaller, and there may be no refund at all. The refund will be pro-rated based on what you paid and how much time is left on the policy.

You can get a refund if you cancel your gap insurance policy early and switch to a different provider, but you may be charged a cancellation fee. Some insurers will charge up to 50% of your premium if you cancel within 60 days, while others charge as little as 25% or nothing at all. Check with your provider to confirm.

To get a refund, contact your gap insurance company and ask them to cancel your policy and issue a refund for unused coverage. You will need to provide information and documents, such as proof that your vehicle was sold, traded, or paid off, and verification of your car's current mileage. You may also need to fill out forms to complete the cancellation. The typical gap insurance refund payout is within 30 days, but it can vary by company and state regulations.

You won't get a refund if your gap insurance policy has expired, or if your vehicle has been stolen or totalled and you file a claim.

Frequently asked questions