Gap Insurance: How To Remove It

Guaranteed Auto Protection (GAP) insurance is an optional insurance policy that covers the difference between your vehicle's market value and the remaining balance on its finance or lease contract if the vehicle is deemed a total loss due to theft, accident, fire, or flood. While GAP insurance is a valuable form of protection, there may be instances when you need to remove it. Here's a step-by-step guide on how to remove GAP insurance from your policy and obtain a refund for any unused coverage.

Cancelling gap insurance from a dealership

Steps to Cancel Gap Insurance from a Dealership:

Check Your Contract:

Gap insurance may be required as part of your car loan or lease contract. If it is, make sure to purchase a new gap insurance policy before cancelling your current one. Your contract should also include the name of the insurance provider the dealership works with. If you cannot find your contract, contact the dealership directly.

Gather Information:

Before initiating the cancellation, gather your policy details, loan or lease documents, and any other relevant information.

Contact the Dealership or Their Insurance Provider:

Reach out to the dealership or their insurance company to inquire about the specific steps required to cancel your gap insurance policy. They may ask you to fill out a gap insurance cancellation form or provide written notice of your intent to cancel.

Make Necessary Payments:

Ensure that you have made all overdue payments, including any interest accrued up to the cancellation date. There may also be a cancellation fee associated with ending your gap insurance policy.

Understand Refund Policies:

If you are cancelling within the specified cancellation period, you may be eligible for a full refund or a pro-rated refund based on the length of your policy. Receiving a refund can take between 4-6 weeks.

Additional Considerations:

• Cancelling gap insurance from a dealership typically follows the same process as cancelling from an insurance company. However, online cancellation may not be available through dealerships.
• It is generally recommended to purchase gap insurance through your auto insurer rather than a dealership, as it can be more cost-effective.
• Before cancelling, consider whether you will have any gaps in your coverage, especially if you still owe money on your vehicle.
• Keep all relevant documentation, including policy numbers, cancellation letters, and email notifications, for future reference.

Getting a refund from a dealership

If you bought your gap insurance from a dealership, you can request a refund from them. However, you must have an active policy in place before cancelling your dealer's policy.

• Locate your vehicle purchase agreement from the dealer. Ensure you have copies of the paperwork you signed when you bought your car. If not, request duplicates from the dealership.
• Contact the dealer's gap insurance provider. Ask them what steps are required to cancel your gap policy. They may require you to provide written notice of your intent to cancel.
• Provide your current contact information to the dealership's insurance company. Without this, any refund may be sent to a previous address.
• Purchase an alternate gap insurance policy before cancelling your current policy. Contact your preferred insurance provider and purchase a new policy to ensure there is no lapse in coverage.
• Sign and return all required paperwork promptly. Get all documents signed and returned as soon as they are received to expedite the process.

The process for getting a refund from a dealership is similar to getting a refund from an insurance company. You will need to contact the insurance company that the dealership works with and request a refund. You will likely need to have a replacement gap insurance policy in place before cancelling.

You may have to wait anywhere from a few days to several weeks to get your refund. The typical payout time is within 30 days, but this can vary depending on the company and state regulations.

Cancelling gap insurance from an insurer

Gap insurance is an extension of your auto insurance that covers the difference between the actual cash value of the car and what you owe on a loan. It is designed to help cover the cost of a vehicle in the event of a total loss. However, you may find that you no longer need it.

If you have purchased gap insurance through an insurer and now want to cancel it, you can typically call or go online to remove the coverage from your policy. Contact your insurer and tell them you have decided to cancel your gap insurance. You may also need to sign a cancellation form and provide other documents. You should also explicitly request a refund if you have paid upfront.

It's important to note that you may be charged a cancellation fee, even if you cancel within the first few days of purchasing the policy. These fees can be as high as 50% of your premium if you cancel within 60 days, so be sure to ask your insurer about any potential charges.

Another thing to consider is whether you will have any gaps in your coverage after cancelling. If you own a car with no loan and have paid it off in full, there will be no gap. However, if you still owe money on your vehicle, cancelling your gap insurance policy could leave you vulnerable in the event of an accident or theft.

To expedite the cancellation and refund process, be prepared to provide documentation such as your vehicle's mileage, which can be verified through an odometer disclosure statement from your dealership. If you have sold your car, you may also need to provide proof of sale.

Keep in mind that cancelling your gap insurance may take some time, and it's important to stay in regular contact with your insurer to ensure the process goes smoothly.

Reasons to cancel gap insurance

Gap insurance is an optional extra that can be purchased alongside a comprehensive auto insurance policy. It covers the difference between the actual cash value of the car and what is owed on the loan in the event of a total loss. However, there are several reasons why you may want to cancel your gap insurance:

You owe less on your auto loan

The primary purpose of gap insurance is to cover the difference between the value of your car and the amount owed on your loan. Once this gap disappears, and you owe less on your car loan than the car is worth, you generally don't need gap insurance.

To switch coverage providers

Gap insurance can be purchased from a dealership or an insurance company. Buying gap coverage through your auto insurer may be cheaper than paying for coverage through a dealership. If your insurer offers a better deal, you can cancel your gap insurance from the dealership and switch to a new provider.

You're selling or trading your car

If you sell or trade a car with gap insurance, you can cancel the coverage. If your gap coverage was provided through a dealership, you can cancel it once your loan or lease is paid off.

You no longer need it

You may no longer need gap insurance if you have paid off your auto loan or paid enough of the balance that it is less than the car's actual cash value.

You want to save money

Gap insurance is an additional cost on top of your regular auto insurance. If you feel that the extra cost is no longer worth it, you may want to cancel it.

Steps to cancel gap insurance

If you've purchased gap insurance and are now looking to cancel it, there are a few steps you can follow. Firstly, it's important to review the terms and conditions of your policy, as there may be cancellation fees involved. Some insurers charge up to 50% of your premium if you cancel within 60 days, while others may charge 25% or nothing at all. It's also crucial to consider whether cancelling the policy will leave any gaps in your coverage. If you still owe money on your vehicle, cancelling your gap insurance could result in insufficient coverage in the event of an accident or theft.

Once you've made the decision to cancel, the next step is to contact your insurer or the dealership where you purchased the coverage. They will be able to provide you with the necessary forms or documentation to initiate the cancellation process. You may also need to submit a written request, which should include your name, address, and vehicle identification number (VIN). Alternatively, if your coverage is through your insurance company, you may be able to cancel online or over the phone.

If you're expecting a refund for the remaining months of coverage, be sure to confirm this with your provider. It may take some time for them to process your request and send you the necessary paperwork detailing the refund amount. Keep all relevant documentation, such as policy numbers, cancellation letters, and email notifications, in a safe place. Ensure your contact details are up to date so that the insurance company can reach you if needed.

By following these steps, you should be able to successfully cancel your gap insurance and receive any applicable refunds. Remember to carefully review the terms of your policy and consider any potential coverage gaps before making any final decisions.

Frequently asked questions