How to cancel GAP insurance?
You can cancel GAP insurance by contacting either the dealership or insurance company that you obtained GAP insurance from. In general, canceling GAP insurance through an insurance company is a bit simpler than doing so through a dealership, since a dealership may need to direct you to the insurance company they use to provide GAP coverage. After canceling GAP insurance, you may qualify for a refund if you only recently signed your car loan or lease agreement.
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UPDATED: Mar 16, 2022
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- GAP insurance is supplemental coverage that helps pay for the difference between what you owe on a car loan and the actual value of your vehicle if it’s totaled
- You can cancel GAP insurance through your insurance company by contacting them directly or using their website or app in some cases
- You can cancel GAP insurance from a dealership by contacting them and completing any necessary paperwork to remove GAP coverage from your loan or lease
GAP insurance is a type of car insurance coverage that’s essential if you want to ensure you’re fully covered in case your car is totaled before you pay off your lease or loan. That said, there are situations where GAP insurance starts to cost more than it’s worth. If this happens you’ll want to know how to cancel GAP insurance as painlessly as possible. Depending on your particular situation, you may even be able to get some or all of the money you paid for GAP coverage back.
With this guide, we’ll show you how to cancel GAP insurance, take a look at some situations where you may be able to obtain a refund, and answer a few other common questions related to canceling GAP insurance. Since how GAP insurance payments work depends on if you purchase it through an insurance company or dealership, we’ll do our best to discuss both options.
How do you cancel GAP insurance?
GAP insurance is supplemental coverage (normally purchased alongside collision and comprehensive coverage) that’s intended to protect you financially in the event that your car is totaled while you’re still making lease or loan payments. In the event of an accident that totals your car, car insurance companies will usually pay out only the actual cash value of your vehicle. And since a new vehicle’s value drops by about 20% in the first year alone, there can be a significant difference between what you have left on a loan or lease and how much your car was actually worth. Without GAP insurance, you could end up owing money on a car that you can’t drive.
According to the Insurance Information Institute, GAP insurance coverage from an insurance company is usually cheaper than GAP coverage from a dealership. Adding GAP insurance to an existing premium costs about $20 per year.
Although it’s great to have while you’re starting to pay off a loan or lease, there are a few reasons why you might want to cancel GAP insurance:
- The amount remaining on your car loan is nearing the actual value of your vehicle
- You recently purchased a car you were previously leasing
- You want GAP insurance from an insurance company instead of a dealership (GAP insurance from a dealership tends to cost more overall)
Canceling GAP insurance is a common practice that’s usually straightforward. If you’re canceling GAP insurance from an insurance company, simply contact your insurance company and let them know you’d like to cancel your GAP insurance coverage. Depending on your insurance company, you may also be able to cancel or adjust your GAP insurance policy through a website or app.
Can you cancel GAP insurance from a dealership?
Yes, you can cancel GAP insurance from a dealership, but the process may be more complicated than canceling through an insurance company. Generally, you can call your dealership and ask to cancel GAP insurance. After that, they may have you provide written notice that shows you want to cancel. You may also have to communicate directly with the insurance company that your dealership uses to add GAP coverage to your loan or lease agreement.
If you’re planning to switch your GAP coverage provider from a dealership to an insurance company, make sure to add GAP insurance to your insurance policy before canceling your dealership GAP coverage. This way, you’re protected in the unlikely event that your car is damaged while you’re changing your GAP coverage.
It’s also a good idea to review the exact terms of your GAP insurance as outlined in your contract with the dealership before you decide to cancel. Details like the maximum amount covered and your eligibility for a refund can vary between different GAP insurance policies — and this is information that’s great to have while you’re comparing alternative GAP insurance coverage.
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Can you get a refund on GAP insurance?
In some cases, yes, you can get a refund on GAP insurance. To see if you qualify for a refund from a dealership, check your contract and see if there’s any information on the dealership’s refund policy. If you bought your car within the past few months, there’s a good chance you’ll receive a full or partial refund on your GAP coverage. That said, getting a refund on GAP insurance from a dealership can take some time because dealerships work with insurance companies to add GAP coverage to your loan or lease agreement.
Since you’ll likely need to contact the insurance company your dealership uses for GAP insurance, follow these steps to cancel and possibly receive a refund:
- First, contact the dealership to let them know you intend to cancel your GAP coverage, and request the contact information for the GAP insurance company they use — if you don’t already have that info.
- Next, get a copy of your purchase agreement. If you can’t find your purchase agreement, contact the dealership for a copy. Having this information on hand will make it easier to communicate with the insurance company.
- After that, talk to the insurance company your dealership used and ask them how to cancel your GAP insurance. Make sure to give them your current address, so they can send you a refund check if you qualify for one.
- Lastly, complete any paperwork the insurance company sends you and be prepared to wait up to six weeks for a refund check to arrive.
Getting a refund on GAP insurance that you purchased directly from an insurance company is a bit easier. If you have documents that show your vehicle was traded in or paid off sooner than anticipated when you purchased GAP coverage, you should be able to receive a refund by contacting your insurance company. Keep in mind that this usually only applies to drivers who paid for their GAP coverage in full upfront.
How long should you keep GAP insurance coverage?
As a rule of thumb, you should keep GAP insurance for one to two years before canceling your coverage. The exact amount of time you should keep GAP coverage depends on two main factors: the actual value of your car and the amount remaining on your lease or loan. Basically, once the difference between your car’s actual value and what you owe on it reaches the break-even point, you should contact your insurance company or dealership about ending your GAP coverage.
If you’re wondering, as many drivers do, how long GAP insurance lasts, you should know that GAP insurance doesn’t “expire” or otherwise end on its own once it stops being of value to you. So make sure you compare your car’s actual value to the amount you have left to pay off every few months in order to cancel your GAP coverage as soon as doing so makes sense.
You can use a resource like Kelley Blue Book or Edmunds True Market Value to determine the actual value of your car if you need this information to make a decision about your GAP coverage.
What to Remember About Canceling GAP Insurance
- Since GAP insurance only pays for the difference between your car’s actual value and how much you still owe on it, you should cancel GAP insurance as soon as you reach the break-even point where your car’s actual value is equal to what you have left on your loan or lease.
- You can cancel GAP insurance from either an insurance company or dealership. Canceling through an insurance company tends to be more straightforward since you can often cancel online or through an app. To cancel GAP insurance purchased from a dealership, contact them directly and ask what steps you have to take to cancel.
- After canceling GAP insurance, you may be eligible for a full or partial refund. If you are eligible, expect to receive a check by mail within six weeks.