How to Cancel GAP Insurance From the Dealership

Guaranteed Asset Protection (GAP) insurance covers the difference between your vehicle loan balance and its actual cash value (ACV) if the vehicle is declared a total loss or stolen. New cars depreciate quickly, often making them worth less than the outstanding loan. If your vehicle is totaled, standard auto insurance typically pays only the ACV, leaving you responsible for the remaining loan. GAP insurance bridges this financial gap, preventing you from owing money on a vehicle you no longer possess.

Understanding When Cancellation Is Possible

Canceling GAP insurance is a practical consideration under several circumstances. The most common reasons include paying off your vehicle loan, selling or trading in the vehicle, or refinancing the loan. Refinancing can make your existing GAP policy redundant, especially if new loan terms or the vehicle’s current value eliminate the “gap.”

Cancellation is also possible when your vehicle’s actual cash value exceeds the outstanding loan balance. This often happens as you pay down the loan and the initial rapid depreciation of a new vehicle slows. Most GAP policies allow cancellation at any time, though specific terms or state regulations may apply.

Gathering Necessary Information and Documents

To cancel GAP insurance, gather the following documents and information:
Your GAP insurance policy number
Your vehicle loan account number
The Vehicle Identification Number (VIN)
A current odometer reading
Your original vehicle purchase agreement
Proof of loan payoff, such as a payoff letter from your lender, or documentation confirming the vehicle’s sale or trade

The Cancellation Process: Step-by-Step

With your documents ready, contact the appropriate party to begin cancellation. If you purchased GAP insurance through a dealership, start with their finance department or the policy administrator. Some policies may direct you to contact the lender directly, as they might manage the cancellation or provide forms.

When you contact them, clearly state your intent to cancel and request the specific cancellation form. Complete the form with your gathered information, such as the policy number, VIN, and odometer reading. Submit the form along with any supporting documents, like a loan payoff letter or sale agreement. Send these documents via a method that provides proof of delivery, such as certified mail, and keep copies for your records.

After submission, obtain confirmation of the cancellation. This could be a reference number, an email confirmation, or a written acknowledgment that your request has been received and is being processed. If you do not receive confirmation within a few business days, follow up to ensure the process is moving forward.

Receiving Your Refund

Once your GAP insurance cancellation is processed, you are typically eligible for a pro-rata refund of the unused premium. This means you receive a portion of the original premium based on the time remaining on the policy. For example, if you cancel a 36-month policy after 12 months, you would generally be refunded for the remaining 24 months.

The refund may be issued directly to you, or it might be sent to your lender to be applied as a principal payment to your outstanding loan balance, thereby reducing the amount you owe. This depends on how the GAP policy was originally financed and the terms of your loan agreement. While some policies may include a small cancellation fee, most of the unused premium is returned.

Refund timeframes vary, often ranging from 30 to 90 days. If you don’t receive your refund within the expected period, contact the party that processed your cancellation (dealership, lender, or administrator) with your confirmation details to inquire about the status. Keep diligent records of all correspondence to assist in tracking the refund.