Gap Insurance: Money-Back Guarantee?

Gap insurance is an optional form of insurance that covers the difference between the actual cash value of a car and the amount still owed on the loan in the event of a total loss. This can include situations where the car is stolen or involved in an accident and subsequently deemed a total loss. Customers can receive money back from gap insurance if they cancel their policy early and have paid in advance. However, this refund will only be for the unused coverage they have already paid for, and there may be cancellation fees involved.

When can you get a refund?

You can get a refund on your gap insurance if you cancel the policy early and have paid your premiums in advance. The refund will be for the unused coverage you paid for.

To get a refund, you must meet certain criteria. Firstly, you need to have paid for the coverage upfront. Secondly, you cannot get a refund if your car was totalled and the policy paid out. You also cannot get a refund if you have filed a claim against the policy.

The amount of the refund will depend on a few factors, including the loan amount, the value of the vehicle, its mileage, and the loan repayment term. The refund will be a pro-rated amount based on what you paid in advance and how much time is left on the policy.

You can usually get a refund at any point before the policy period expires. For example, if you purchase a policy for 48 months and sell your car after 12 months, you can request a refund.

It's important to note that every insurance company is different, and there may be specific cutoff deadlines for refunds. Additionally, you may be charged a cancellation fee, so it's essential to review the terms and conditions of your policy before cancelling.

How much money will you get back?

The amount of money you will get back from a gap insurance refund depends on several factors. Firstly, you will only be eligible for a refund if you have paid for your gap insurance upfront. If you pay monthly, your refund will be much smaller, or there may be no refund at all.

The amount of the refund will depend on factors such as the loan amount, the value of the vehicle, the vehicle's current mileage, and the loan repayment term. The refund will also depend on how much of your policy is left. You can calculate the refund by dividing the total cost of the insurance by the number of months you had coverage, giving you your monthly premium. Then, multiply this figure by the number of months left on your policy.

For example, if you paid $1,000 for a policy lasting 36 months and you cancel after 20 months, you will get a refund for the remaining 16 months. Assuming a monthly premium of $27, you will receive a refund of around $444.

It's important to note that not all gap insurance policies are the same, and you should check with your insurance provider to understand the specific terms of your policy.

What is a GAP insurance refund?

A GAP insurance refund reimburses policyholders for the balance of the premium that has not been used. If you pay your insurance bill annually and pay it off early, you can get a refund for the coverage for the remainder of the year that you have already paid for.

There are typically three situations in which you can cancel your GAP insurance and get a refund:

• 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 will only get back a prorated refund for the part you haven't used.
• Switching insurance companies: If you cancel your policy within 30 days of its start date, you can get a full refund (including GAP insurance costs). If you cancel after 30 days, your refund will be prorated.
• Selling or trading your car: If you sell or trade a car for which you have bought GAP insurance, you can get a refund on the amount of coverage you didn't use.

There is only one situation in which you cannot get a GAP insurance refund: if your insured car is declared a total loss and your GAP policy pays out the difference between the car's value and your loan balance, you won't be eligible for a refund for the remaining months of coverage. This is because the insurance provider has already met its obligation for the GAP coverage.

How do you request a refund?

To request a refund for your gap insurance, you must have paid for your coverage in advance and not filed a claim against the policy. You can then follow these steps:

• Contact your gap insurance company and ask them to cancel your policy and issue a refund for the unused coverage.
• Be prepared to provide information and documents to your insurance company, 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 your insurance company requires to complete the cancellation.
• Provide your current contact information, including an updated address, to ensure you receive any refund.
• Keep all documentation, including policy numbers, cancellation letters, and email notifications.
• Be aware that your refund amount will be prorated based on what you have paid in advance and how much time is left on the policy.
• If you purchased gap insurance from a dealership, contact the insurance company the dealership works with and provide them with the necessary paperwork.

It's important to note that the process and requirements for obtaining a refund may vary depending on your insurance company and the specific terms of your policy. Be sure to review your policy carefully and contact your insurance provider for specific instructions on requesting a refund.

When will you not get a refund?

Gap insurance refunds are usually given when a policy is cancelled early and coverage has been paid for in advance. However, there are several circumstances in which you will not be eligible for a refund.

Firstly, you will not get a refund if your gap insurance policy has expired. Secondly, if there is a deadline by which you must make a claim, and this deadline has passed, you will not be able to claim a refund. This deadline will be detailed in your policy. Thirdly, if you have not paid your gap policy premium, you will not be eligible for a refund.

Additionally, you will not get a refund if your car has been totalled or stolen and you have filed a gap insurance claim. This is the case even if you have paid for your gap insurance upfront. If you have not filed a claim, you may be able to get a refund.

Finally, you may be charged a cancellation fee by your insurer, which could reduce the amount of money you get back.

Frequently asked questions