Gap Insurance: Getting A Refund

Guaranteed auto protection (GAP) insurance reimburses you if your car is stolen or written off, and you still owe money on the car loan. If you cancel your GAP insurance policy early, you may qualify for a refund. The amount of the refund depends on several factors, including how you pay your insurance bill, the loan amount, the vehicle's mileage and value, and how much time is left on the policy. To request a refund, contact your insurance provider and inquire about the proper procedure. You may need to provide documentation such as proof of sale or auto payoff letter. The timing for refunds varies but typically occurs within a month.

Cancelling within the first 30 days

Firstly, it's important to understand what GAP insurance is and how it works. GAP insurance covers the difference between the actual cash value (ACV) of your car and the amount you still owe on your lease or loan. This type of insurance comes in handy if your car is totalled or stolen before you finish paying off your loan or lease.

Now, when it comes to cancelling your GAP insurance policy and getting a refund, there are a few key things to keep in mind. If you cancel your policy within the first 30 days of its start date, you may be eligible for a full refund, minus any cancellation fees. This is a much better outcome than if you were to cancel after 30 days, in which case your refund will likely be prorated.

It's also worth noting that some insurance companies may not offer any refund if you cancel within the first few days of purchasing the policy. Some insurers will even charge a cancellation fee of up to 50% of your premium if you cancel within the first 60 days. So, it's always a good idea to review the terms and conditions of your policy before cancelling.

If you decide to go ahead with the cancellation, the next step is to contact your insurance provider. They will be able to guide you through the process and provide you with the necessary forms to fill out. You may also need to provide documentation, such as proof of sale or an auto payoff letter. Keep in mind that you will only receive a refund for the GAP insurance that you haven't used, and the amount will depend on how you paid your insurance bill. If you paid monthly, you may not get a refund at all, as you've only paid for the coverage you've received so far.

Remember to keep all the relevant documentation, including policy numbers, cancellation letters, and any other correspondence with your insurance company. It's also a good idea to stay in touch with your insurance provider to ensure a smooth and speedy refund process.

Switching insurance companies

Switching car insurance companies is a straightforward process, but it's important to be aware of a few key considerations. Firstly, ensure that your new policy provides similar coverage, limits, and deductibles to your existing policy. While a new insurer may offer a cheaper rate, their protection and claims fulfilment may not match your current provider's standards. It's also crucial to avoid any gaps in coverage, so make sure your new policy is already in effect before cancelling your previous one.

• Compare Policies: Obtain quotes from multiple insurance companies and compare their coverages, limits, and deductibles. Don't focus solely on price; consider the value and quality of the coverage offered. Evaluate how the new insurer handles claims and their availability.
• Avoid Coverage Gaps: Ensure there is no lapse in your car insurance coverage. It is recommended to have your new insurance policy start at least one day before your current coverage ends. Even a one-day gap can increase your future insurance rates as insurance companies consider you an uninsured driver during that time.
• Purchase the New Policy: When you've found a suitable new insurer, purchase the new policy. Remember to list your lender on the new policy if you have an auto loan or lease.
• Cancel Your Old Policy: Contact your previous insurer to cancel your old policy. You will likely be entitled to a refund for any unused portion of your policy, minus any cancellation fees that may apply.
• Obtain Proof of Insurance: Print out your new insurance ID card or download an app that provides digital access to it. Most states accept digital ID cards if you're pulled over.
• Inform Your Lender: If you have a car loan or lease, notify your lender about the change in insurance coverage. This step is crucial because your lender needs to be listed as a loss payee on your new policy.

By following these steps, you can switch insurance companies effectively, ensuring continuous coverage and avoiding unnecessary fees or rate increases.

Paying off your loan

If you pay off your car loan early, you are eligible for a partial refund for the GAP coverage that you haven't used yet. This is because you've already used a portion of your GAP insurance policy while your loan was still active, so you'll only get back a prorated refund for the part you haven't used yet.

To calculate how much of a refund you'll get, divide the total cost of the insurance by the number of months you had coverage. This gives you your monthly premium. Then, multiply this by the number of months left on your policy. This will give you a good indication of how much your refund should be, but all insurance providers have different processes, so you'll need to confirm the amount with them.

If you paid for your GAP insurance monthly, you may still qualify for a refund, but it will likely be much smaller than if you had paid upfront.

To request a refund, first reach out to your lender or dealer and inquire about the proper way to request a refund. You can also consult your contract, as there may be additional paperwork you need to complete. The timing for refunds can vary, but they typically occur within a month.

Remember, you have to ask for a GAP insurance refund—most insurance companies won't offer them automatically.

Selling or trading in your car

If you sell or trade in your car before the GAP insurance policy expires, you can get a refund on the amount of coverage you didn't use. However, you should wait to cancel your insurance until the car is legally sold or traded.

You can calculate your refund by taking the total cost of your GAP insurance and dividing it by the number of months you had coverage. Then, multiply the monthly premium by the number of months left on your policy. This will give you a good indication of how much your refund will be, but the exact amount will depend on factors such as the value of the vehicle, the amount of the auto loan, the vehicle's current mileage, and the loan repayment term.

To request a refund, contact your insurance provider and inform them that you want to cancel your GAP insurance and obtain a refund for the remaining coverage. They will provide you with the necessary paperwork and let you know what other information is required. Most insurance carriers will need to see an odometer disclosure statement verifying the car's current mileage, which you can obtain from your state's DMV website. If you have paid off your auto loan, your insurance company may also request a letter from your lender verifying that the loan has been closed.

Once you have submitted all the necessary paperwork and documentation, you should receive your refund within a few weeks. Most insurance companies will give you the option to receive your refund via physical check or direct deposit.

Cancelling after a total loss

If your car is deemed a total loss and your gap coverage insurance pays the difference between what you owe on your car loan or lease and your car's actual cash value, you won't be eligible for a gap refund for the remaining months of coverage. This is because the insurance provider considers that they have already met their obligation for the GAP coverage you bought and are no longer responsible for payouts on the policy.

However, you can get a gap insurance refund after a total loss if you don't file a gap insurance claim. If your car insurance payout covers the loan balance in full and you don't need to use the gap insurance, you can then cancel the policy and request a refund. You can't get a gap insurance refund if you file a claim for the loss.

If your vehicle is stolen or becomes totalled and is no longer drivable, you might not qualify for a refund. Instead, you may need to use the policy to cover your losses.

Frequently asked questions