Can You Get Money Back From GAP Insurance?

Guaranteed Asset Protection (GAP) insurance is an optional financial product designed to protect vehicle owners from potential financial loss. It covers the difference between a vehicle’s actual cash value and the amount owed on a loan or lease if the vehicle is declared a total loss due to theft or an accident. Many consumers acquire GAP coverage when financing a vehicle and may wonder if a refund is possible. A refund is indeed possible, though specific conditions and calculations apply.

Eligibility and Refund Calculation for GAP Insurance

A GAP insurance refund is possible when the policy’s necessity ends earlier than its original term. This often occurs when paying off the vehicle loan early, selling or trading in the vehicle, or independently canceling the policy. If premiums were paid monthly, a refund might be smaller. However, if a lump sum was paid upfront, you are typically entitled to a refund for the unused portion.

The refund amount is generally determined on a “pro-rata” basis, calculated based on the unused portion of the policy’s term. For example, a 36-month policy canceled after 20 months would issue a refund for the remaining 16 months. To estimate a pro-rata refund, divide the total premium by the total months of coverage, then multiply that monthly cost by the number of unused months. Some policies, like GAP waivers, might use a “Rule of 78s” calculation, resulting in a smaller refund in the early stages.

The refund is not a full return of the initial premium. Administrative fees or cancellation charges may be deducted from the calculated refund. If a claim was filed and a GAP benefit paid out, you typically will not be eligible for a refund. The specific terms and conditions regarding refunds, including any fees, are outlined in your GAP insurance contract.

Steps to Request a GAP Insurance Refund

Initiating a GAP insurance refund requires action, as refunds are not automatically issued. First, identify the original provider of your GAP coverage, such as the dealership, loan servicer, lender, or a third-party insurance company. Contact them to understand their specific cancellation and refund procedures.

Before making contact, gather all relevant information and documents to streamline the request. This includes the GAP insurance policy number, vehicle identification number (VIN), loan account number, and proof of loan payoff or vehicle sale if applicable. You may also need to provide an odometer disclosure statement.

Submission methods for refund requests vary, often including phone calls, written letters or emails, or online portals. Be prepared to complete any specific cancellation forms required by the provider. Once submitted, processing time for a refund typically ranges from four to six weeks. Refunds are commonly issued via check or direct deposit, and it is advisable to keep records of all communications and submitted documents.