Gap Insurance: Transferable Or Not?

Gap insurance covers the difference between the cash value of your car and any outstanding balance on a loan or lease if your car is declared a total loss. It is not transferable if you sell your car, but you could get a refund for any unused portion of the policy. Whether you can transfer your gap insurance depends on where you purchased it. Gap insurance from a lender or lessor is typically not transferable, but you may be able to transfer gap insurance from a vehicle manufacturer or a car insurance company.

Gap insurance covers the difference between the cash value of your car and the loan balance if it's stolen or damaged

Gap insurance is a type of auto insurance coverage that covers the difference between the cash value of your car and the loan balance if it is stolen or damaged. It is an optional coverage that you should consider buying if you have leased or financed your vehicle.

If your vehicle is stolen or totaled, gap insurance will pay the difference between what you owe on your car loan and the actual cash value your insurer pays out. This can be extremely helpful if you owe more on your car loan than the car is worth, as your standard insurance may not cover the full amount.

For example, if you owe $25,000 on a car loan and your car is only worth $20,000, gap insurance can cover the $5,000 gap, minus your deductible. Gap insurance can provide valuable peace of mind and protect you from being obligated to make continued payments on an asset you can no longer use.

It's important to note that gap insurance has some limitations. It won't cover overdue lease or loan payments, extended warranties, financial penalties for excessive use, or mechanical issues like engine or transmission failure. Additionally, gap insurance is not transferable if you sell your car. However, you may be entitled to a refund for any unused portion of the policy.

Gap insurance is not transferable when selling or refinancing a vehicle

Gap insurance, or guaranteed asset protection insurance, is a type of supplemental auto insurance that covers the difference between the actual cash value of a vehicle and the current outstanding balance on its loan or lease in case it is stolen or totaled. It is dependent on the vehicle and the terms of the loan and is usually sold at the dealership when a new car is financed.

When to Consider Gap Insurance

Gap insurance is generally a requirement for leased vehicles and is a critical coverage for them since they are not building equity. It is also worth considering when:

• The down payment on the vehicle is small (under 20%)
• The loan term is long
• The vehicle depreciates quickly
• The vehicle is on the road a lot

Refunds on Gap Insurance

If you sell your car or pay off your loan early, you may be entitled to a refund for the unused portion of your gap insurance policy. Many companies issue this credit automatically, but it is good practice to contact your insurance company to notify them of the sale and find out the amount of your refund.

Gap insurance is sometimes transferable, depending on the provider

When refinancing a vehicle, the original loan is paid off, so the gap coverage from the lender or lessor is no longer applicable. On the other hand, gap insurance from a manufacturer or insurer is usually attached to the vehicle itself rather than the loan or lease. In such cases, you may be able to transfer the gap insurance policy to a new vehicle or owner for a fee. It is important to note that not all insurance companies or manufacturers allow transfers, so it is essential to check with your provider.

When selling your vehicle, the gap insurance policy remains in effect for the duration of its term. However, the coverage only applies to the original owner, and the new owner cannot benefit from the existing policy. Therefore, if you sell your car, you should contact your insurance provider to cancel or adjust your gap insurance policy and request a refund for any unused portion.

You may be eligible for a refund for any unused gap insurance

If you sell your car or pay off your loan early, you may be eligible for a refund for any unused gap insurance. This is because gap insurance is not transferable, so if you sell your car, the coverage will no longer apply to you.

To get a refund, you will need to meet certain criteria. Firstly, you must have paid for your coverage in advance. You won't be able to get a refund if you have already filed a claim against the policy, for example, if your car has been stolen or written off and the gap insurance has paid out.

The refund will be a pro-rated amount based on what you have paid in advance and how much time is left on the policy. For example, if you paid $1,000 for a 36-month policy and repay your vehicle loan in full after 20 months, you will get a refund for the 16 months of unused coverage.

To initiate the refund, contact your insurance provider to cancel the policy and request a refund. They will guide you through the process and let you know what paperwork you need to submit. This may include an odometer disclosure statement and a letter from your lender verifying that the loan has been closed.

It's worth noting that the process may differ depending on whether you bought your gap insurance from a dealership or an insurance company. If you purchased it from a dealership, the insurance company that works with the dealership will process your refund.

Gap insurance is optional and not required by any state

Gap insurance is designed to protect the original owner or lessee by covering the shortfall between the car's actual cash value and the remaining loan or lease balance. The new owner would need to obtain their own gap insurance policy if they wish to have similar coverage.

Gap insurance is not transferable if you sell your car. However, your insurer may issue a refund for any unused portion of your policy, and you can find gap insurance rates for as low as $2/month.

Gap insurance is typically not transferable if you sell the car. Gap insurance is tied to the specific vehicle and covers the difference between the actual cash value of the car and the remaining balance on your auto loan or lease. When you sell the car, the insurance policy stays with the vehicle and does not transfer to the new owner.

When you sell your car, the gap insurance policy remains in effect for the duration of its term, which is usually determined by the length of your loan or lease agreement. However, the coverage only applies to the original owner or lessee of the vehicle. If you sell the car, the coverage will no longer apply to you, and you will need to cancel the policy or notify your insurance provider about the change in ownership.

If you pay off your car, your gap insurance ends since there isn't a gap between your car's market value and the loan. Contact your gap insurer to see if you can get a partial refund.

Frequently asked questions