How to Get Rid of GAP Insurance and Get a Refund

Guaranteed Asset Protection, commonly known as GAP insurance, is an optional auto insurance coverage designed to protect car owners from a specific financial risk. This coverage bridges the financial “gap” that can arise between the amount owed on a car loan or lease and the vehicle’s actual cash value if it is declared a total loss or stolen. Cars typically depreciate significantly the moment they are driven off the lot, and standard auto insurance policies only pay out the vehicle’s market value at the time of loss.

This can leave a car owner responsible for paying the remaining loan balance out of pocket if the payout from their primary insurance is less than what they still owe. Many individuals purchase GAP insurance, sometimes because it is a requirement from their lender, or for financial peace of mind. This article guides readers through canceling GAP insurance.

Key Moments for Cancellation

Canceling GAP insurance becomes viable under specific circumstances, often when the initial financial risk it was designed to mitigate has significantly decreased or disappeared. The necessity of GAP insurance is directly tied to the relationship between your outstanding loan balance and your vehicle’s current market value. As your loan balance decreases, or your vehicle’s value changes, the “gap” that the insurance covers may narrow or vanish.

One common scenario for cancellation is the full payoff of your car loan. Once the loan is settled, there is no longer a balance to protect, rendering GAP insurance unnecessary. Similarly, if you decide to sell your vehicle, the loan is typically paid off as part of the transaction, eliminating the need for this coverage.

Refinancing a car loan can also present an opportunity to cancel existing GAP coverage. When a loan is refinanced, its terms, interest rate, and balance may change, potentially making the original GAP policy redundant. If the vehicle has been declared a total loss or stolen and the primary insurance claim settled, the GAP policy has served its purpose, making cancellation appropriate.

A financial tipping point occurs when your car’s market value exceeds your remaining loan balance. While vehicles generally depreciate, loan balances also decrease with regular payments. You can assess this by checking your loan statements and using online car valuation tools to compare the current market value against your outstanding debt. Once your vehicle is worth more than you owe, the “gap” that GAP insurance covers no longer exists.

The Cancellation Process

Once you identify a suitable moment for cancellation, take proactive steps to formally end your GAP insurance policy. The first step involves determining the provider of your GAP insurance, which could be the dealership, your lender, or a third-party insurer. You can find this information on your original loan documents, the purchase agreement, or your insurance declarations page.

After identifying the provider, gather all necessary information and documents required for the cancellation request. This includes your loan account number, the vehicle identification number (VIN), your GAP policy number, and the current odometer reading of your vehicle. If applicable, you will also need a loan payoff statement or the exact date your loan was paid in full, or proof of sale if the vehicle was sold. These specific details allow the provider to accurately process your request.

Next, you will need to contact the GAP insurance provider to initiate the cancellation. This can often be done via a phone call to their customer service department, through email, or by visiting a local branch if available. Clearly state your intention to cancel your GAP policy and provide all the previously gathered information as requested by their representative.

Some providers may require a formal written cancellation request. If a written request is necessary, ensure it includes all relevant policy and vehicle information, the reason for cancellation, and your contact details. Send such requests via certified mail with a return receipt requested, providing proof of submission and delivery. You may also be directed to a specific form on their website or provided one by customer service for completion.

Following up on your cancellation request is a prudent final step to ensure it has been processed correctly. Contact the provider again after a reasonable period to confirm the cancellation and request written confirmation that your policy has been terminated. This documentation serves as an important record for your financial files.

Receiving Your Refund

Upon successful cancellation of your GAP insurance policy, you are eligible for a prorated refund of the premiums you paid. A prorated refund means you receive back a portion of your original premium that corresponds to the unused period of your coverage. For instance, if you paid for five years of coverage but canceled after two, you would receive a refund for the remaining three years, minus any applicable fees.

The method by which your refund is issued can vary depending on how the GAP insurance was initially financed. In many cases, especially if the GAP premium was rolled into your car loan, the refund amount will be applied directly to your outstanding loan balance. This reduces the principal amount you owe, potentially lowering future payments or shortening your loan term.

Alternatively, if you paid for the GAP insurance separately or if your loan has already been paid off, the refund may be issued directly to you as a check. The timeline for receiving a refund ranges from several weeks to 30 to 60 days from the date the cancellation is processed. This period allows for administrative processing and verification.

Monitor your loan statements or bank accounts for the expected refund. If the refund is not received within the anticipated timeframe, promptly follow up with the GAP insurance provider or the lender. Maintain detailed records of all communication regarding your cancellation and refund, including dates, names of representatives, and reference numbers. Be aware that some policies may include a small administrative fee that could be deducted from your total refund amount.