Jeffrey Wade
Gap insurance covers the difference between what you owe on a car loan or lease and the depreciated value of your car if it is written off due to a problem covered by your policy, such as a car accident. It is not a legally required insurance type, and you can cancel it at any time. To cancel your gap insurance, you will need to contact the company providing coverage, such as the dealership where you bought your car or your insurer. If you have paid upfront for your gap insurance, you may be eligible for a refund.
| Characteristics | Values |
|---|---|
| Can you drop gap insurance? | Yes, you can drop gap insurance at any time. |
| When to drop gap insurance? | When the loan balance is less than the vehicle's actual cash value. |
| How to drop gap insurance? | Contact the insurance company, review the policy, get an odometer disclosure statement, request cancellation forms, submit the required documents. |
| How to drop gap insurance from a dealership? | Locate the vehicle purchase agreement, contact the dealer's insurance provider, provide current contact information, purchase alternate coverage, sign and return all required paperwork. |
| Will you get a refund? | Yes, if you paid upfront or in full. No refund if you pay monthly. |
What You'll Learn
Cancelling gap insurance from a dealership
- Review your policy: Check the terms and conditions of your gap insurance policy. This will help you understand any cancellation fees that may apply and how your insurance provider will compensate you once you cancel.
- Get your mileage: Obtain an odometer disclosure statement to verify your car's mileage. Make sure to get an official statement from the dealer, as some insurance carriers don't allow self-reporting of mileage.
- Contact the dealership or their insurance provider: Ask them about the steps and requirements for cancelling your gap insurance policy. They may require you to fill out a gap insurance cancellation form and provide written notice of your intent to cancel.
- Provide necessary information and documents: Gather your policy details, loan or lease documents, and any other relevant information. You may also need to provide proof of a new gap insurance policy, especially if you have a leased vehicle.
- Make any necessary payments: Ensure you make any overdue payments, including any interest that has accrued. Be aware that there may also be a cancellation fee associated with ending your gap insurance policy.
- Sign any required documents: After submitting your cancellation request and providing the necessary information, the insurance provider will likely send you documents to finalise the cancellation. Sign and return these promptly to expedite the process.
- Follow up on your refund: If you are eligible for a refund, keep in mind that it may take some time to process and receive your money back. Stay in communication with the insurance provider to understand the timeline and any additional steps required.
It's important to note that gap insurance is designed to protect you financially when you owe more on your vehicle than its current market value. Cancelling gap insurance may leave you exposed in certain situations, so it's recommended to have a replacement policy in place before cancelling your existing one. Additionally, review the terms of your car loan or lease agreement, as some lenders may require you to maintain gap insurance until your loan balance is less than the car's value.
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Cancelling gap insurance from an insurance company
Gap insurance covers the difference between what you owe on a car loan or lease and what the insurance company will pay out if the car is a total loss. It is an optional form of insurance and can be cancelled at any time.
There are several reasons why you might want to cancel your gap insurance:
- You no longer need it because you have paid off your loan or lease
- You are switching to a new gap insurance provider
- You are selling your car
- You want to lower your insurance premiums to save money
If you have paid for your gap insurance upfront, you may be entitled to a refund for the unused portion of your coverage. However, if you pay monthly, you may receive a smaller refund or no refund at all. Before cancelling, check your policy for any cancellation fees. Some insurers charge up to 50% of your premium if you cancel within 60 days, while others charge 25% or nothing at all.
To cancel your gap insurance, you will need to contact your insurance company. You may be required to fill out a cancellation form and submit other documents. If you bought your gap insurance through a dealership, you should contact the dealership or coverage provider directly.
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When to cancel gap insurance
Gap insurance is an optional form of financial protection for newer financed or leased vehicles. It covers the difference between the current value of your car and the amount you still owe your lender if your car is stolen or totaled.
- Your loan amount drops below the car's value: Gap insurance is only valuable when you owe more than what the car is worth. If your car's value is greater than the remaining loan balance, you're essentially paying for coverage that you will never use, even if your car is stolen or totaled. This usually happens after about two years of loan payments.
- You pay off your loan early: If you pay off your loan before the end of the loan term, you may no longer need gap insurance.
- You sell or trade your vehicle: If you sell or trade your vehicle, you may no longer need gap insurance as the new owner will be responsible for insurance. However, it is recommended to wait to cancel the policy until after the sale or trade is complete to avoid any gaps in coverage.
- You no longer feel it is necessary: If your car has depreciated to the point where the cost of gap insurance is no longer worth it to you, you may choose to cancel the policy.
- You switch insurance providers: If you find a better deal with a different insurance company, you may decide to switch providers and cancel your current gap insurance policy.
- You need to lower your expenses: If you are looking to cut costs, you may decide to cancel your gap insurance policy, especially if your car has depreciated and the risk of owing more than its value is lower.
It's important to review the terms and conditions of your gap insurance policy before cancelling, as there may be cancellation fees or other restrictions. Additionally, if you have paid your premium upfront, you may be entitled to a refund for the unused portion of your coverage.
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Getting a refund for gap insurance
Gap insurance covers the difference between what you owe on a car loan or lease and the depreciated value of your car if it is deemed a total loss. While gap insurance is not mandatory, it is usually paid upfront and you may be eligible for a refund of the unused coverage if you cancel your policy.
You may be eligible for a refund under the following circumstances:
- You no longer want or need gap insurance.
- You change gap insurance companies.
- You have paid off your auto loan or reduced the balance below the car's actual cash value.
- You sold or traded in your vehicle before paying off your loan.
It is important to note that you will not receive a refund if your gap insurance policy has expired or if the deadline for making a claim has passed. Additionally, you must have paid your gap policy premium to be eligible.
How to get a refund:
- Review your policy to understand any cancellation fees or compensation details.
- Obtain an odometer disclosure statement to verify your car's mileage.
- Request cancellation forms from your gap insurance company.
- Submit the required documents, including proof of the sale, trade-in, or payoff of your vehicle, as well as verification of your car's current mileage.
- Fill out and submit any additional documentation or forms required by your insurance company to complete the cancellation.
The time frame for receiving a refund may vary, but it typically takes within 30 days. The amount of the refund will depend on the cost of the premium and the length of time left on your policy.
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Reasons to cancel gap insurance
Gap insurance covers the difference between what you owe on your car loan and the depreciated value of your car if it is deemed a total loss. While this type of insurance is useful, there are several reasons why you may want to cancel your gap insurance. Here are some common reasons:
You owe less on your auto loan
Once the amount you owe on your car loan is less than the car's value, you generally don't need gap insurance. This is because the gap between the loan balance and the car's value has decreased, reducing the risk of being upside down on your loan.
Switching coverage providers
Gap insurance purchased through a dealership can be more expensive than buying it through your auto insurer. If you find a better deal with another provider, you can cancel your existing gap insurance and switch to a new provider.
Selling or trading in your vehicle
If you sell or trade in your vehicle, you can cancel your gap insurance. This is because the gap insurance is specific to the vehicle and the loan associated with it.
Paying off your loan early
If you manage to pay off your car loan early, congratulations! You may no longer need gap insurance as you no longer have a loan balance to cover. In this case, you can cancel your gap insurance and may even be eligible for a partial refund for the unused coverage.
Remember that when cancelling gap insurance, you will need to contact your gap insurance provider and may need to fill out certain forms or provide documentation. Additionally, review the terms and conditions of your policy, as there may be cancellation fees involved.
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Frequently asked questions
Contact the company providing coverage, such as the dealership where you bought your car or your insurer. If you're cancelling coverage purchased through a dealership, contact them directly. You may need to sign a cancellation form and other documents. If you have coverage through your insurance company, you can typically call or go online to remove gap coverage from your policy.
There may be a cancellation fee, which varies depending on your provider and the type of policy acquired. It's best to check with your insurer before cancelling.
A good time to cancel is when the remaining balance of your loan is less than the book value of your car. This is when the loan balance is less than your vehicle's actual cash value. At this point, there is no longer a "gap" to cover.
You may get a refund for gap insurance if you paid upfront for your coverage. This refund will be prorated based on how long you had the coverage in place. If you paid monthly, you may get a much smaller refund, or none at all.
Contact your gap insurance company and ask them to cancel your insurance and issue a refund for unused coverage. You may 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.
