How to Cancel Your GAP Insurance Policy

Guaranteed Asset Protection, known as GAP insurance, offers coverage for the difference between a vehicle’s actual cash value and the remaining balance on an auto loan if the car is declared a total loss or stolen. This protection becomes relevant when an insurance payout for a totaled or stolen vehicle is less than the amount still owed to the lender. Many vehicle owners find themselves in situations where canceling their GAP insurance policy becomes an appropriate financial decision, such as when a loan is paid off, a vehicle is sold, or a loan is refinanced. This article guides you through the process of canceling your GAP insurance policy.

Determining Eligibility for Cancellation

The ability to cancel a GAP insurance policy typically arises from specific changes in your financial or vehicle ownership circumstances. One common trigger for cancellation is the complete payoff of your auto loan. Once the loan balance reaches zero, the original purpose of GAP coverage, which is to protect against a negative equity scenario, no longer exists.

Another frequent reason for policy cancellation occurs when you sell or trade in the insured vehicle. Since the vehicle is no longer under your ownership and tied to the original loan, the GAP policy associated with it becomes unnecessary. Refinancing your auto loan can also create eligibility for cancellation, as the terms of the original loan and any associated GAP policy may be voided by the new financing agreement.

Gathering Necessary Information

Before initiating the cancellation of your GAP insurance policy, it is important to compile all relevant documentation and information. You will need your GAP insurance policy number, the effective date of the policy, and the precise name of the GAP insurance provider. This provider might be a different entity from your primary auto insurer or your loan lender.

Gathering details about your auto loan is also a necessary step. This includes your original loan agreement, the current outstanding loan balance, the name of your loan lender, and your specific loan account number. If your loan has been fully paid off, having documentation that confirms the payoff date will be required. Additionally, prepare your vehicle’s identification number (VIN), along with its make, model, and year. Personal identification details such as your full name, current address, phone number, and email address, as they are recorded on your policy and loan documents, will also be needed.

Steps for Canceling Your Policy

With all necessary documentation, the next step is to contact the correct party to cancel your GAP insurance policy. This could be your loan lender, the dealership where the policy was purchased, or the GAP insurance company directly. Your policy documents or original loan agreement typically specify the administrator and cancellation procedure.

You can usually initiate contact via phone, written request (mail or email), or an online portal. Clearly state your intention to cancel and provide all gathered policy, loan, and vehicle information. The provider will likely require supporting documentation, such as proof of loan payoff or a bill of sale if the vehicle was sold. Many also require a specific cancellation form. Document the date and time of your request, the representative’s name, and retain copies of all submitted forms and correspondence.

Receiving Your Refund

Upon successful cancellation of your GAP insurance policy, you can anticipate a refund for the unused portion of your coverage. Most refunds are calculated on a prorated basis, reflecting the time remaining on your policy from the cancellation date. The precise refund amount is influenced by the initial cost, active duration, and any administrative fees or cancellation charges specified in your policy terms.

Refunds are typically processed in one of two ways. If there is an outstanding balance on your auto loan, the refund amount is most commonly applied directly to reduce your principal loan balance. If your loan has already been paid off, the refund will usually be issued directly to you as a check. The timeline for receiving your refund can vary, generally taking two to eight weeks for funds to be processed and disbursed. After this timeframe, review your loan statements or bank accounts to confirm the refund has been successfully applied or received.