GAP insurance reimbursements are similar to the $20 note you left in your pocket while wearing your jeans and later discovered when doing the laundry. Even though the $20 was technically always yours, you nevertheless feel lucky to have found it. Right?
You may experience the same emotion in relation to GAP insurance returns. Even if you knew the refund was coming and that it was actually your money in the first place, it still feels like receiving a surprise gift when it occurs.
Let’s get you started by determining whether you qualify for a gift (er, a GAP insurance refund), and if so, how to obtain one.
GAP Insurance: What Is It?
Let’s review the fundamentals of GAP insurance before getting into the specifics of returns.
GAP insurance covers the discrepancy between the car’s actual cash value (ACV) and the balance owed on your loan or lease. Therefore, GAP insurance will reimburse the difference if you financed or leased your automobile (not a good idea! ), and your car is totaled or stolen before you have a chance to pay off your loan or lease.
A GAP Insurance Refund: What Is It?
A GAP insurance refund, as the name implies, pays insurance policy holders for the unused portion of the premium.
Let’s imagine, for example, that you borrowed a sizeable amount of money to buy your car and that GAP insurance was purchased to safeguard your emergency fund in the event that the car was stolen or damaged.
You are able to pay off your car loan earlier than anticipated after 2.5 years. (Bravo!) You can receive a refund for the GAP coverage for the additional half-year you previously paid for if you pay your insurance payment annually rather than monthly.
Refunds from GAP insurance can be a little unclear after conditions are added. But there’s no need to worry. We’ll go into more detail regarding the specifics of how GAP refunds operate in every circumstance in the section that follows.
What’s the Process for a GAP Insurance Refund?
Following are some scenarios that illustrate when you can and cannot receive a GAP insurance reimbursement.
When to Request a Refund for GAP Insurance
Start with the positive news. You can normally cancel your GAP insurance and receive a return in one of three circumstances:
1. You are repaying your debt
It can be a terrific feeling to pay off your auto loan and get rid of that tiresome monthly cost (including those outrageous interest payments). Better still? You are qualified for a portion of the GAP coverage that you haven’t yet used if you pay off your auto loan early. Here’s the justification for your meager return. While your loan was still open, you previously used a portion of your GAP insurance. Therefore, you will only receive a prorated refund for the portion that you haven’t yet utilized.
2. You’re transferring to a new insurance provider
You can choose a different supplier of insurance if you’re not happy with your current one. You are entitled to a refund for the canceled coverage you didn’t use after canceling your policy with your original provider (be sure to have new auto insurance in place before canceling the prior insurance). Normally, you can receive a full refund (including the cost of GAP insurance) if you cancel your insurance within 30 days after the policy start date. Your refund will be prorated if you cancel your insurance after 30 days have passed. For information regarding your coverage, contact your insurance company.
3. You’re trading in or selling your vehicle
You can receive a reimbursement for the portion of the coverage you didn’t utilize if you sell or trade an automobile for which you purchased GAP insurance. Don’t terminate your insurance until the vehicle has been lawfully sold or exchanged.
Here is one instance. Let’s imagine you first made the decision to purchase a $30,000 car and borrowed $25,000 to do so. In order to safeguard your financial security in the event that the car is totaled or stolen before you have had a chance to pay off your $25,000 loan, you also purchased GAP insurance for a full year. (Smart!)
You want to end your GAP insurance coverage after three months of coverage. Any of the aforementioned factors (debt payback, changing GAP insurance providers, or selling or swapping your car) could be the cause. For the nine months of the year you didn’t utilize your GAP insurance, you’ll get a refund. Nice!
An immediate reminder on reimbursements from loan payoffs: You’ll get a portion of your GAP coverage that you haven’t utilized back once you present your loan payoff notice to your GAP insurance provider. Wait until the car is either legally no longer yours or your initial loan is formally paid off, depending on why you want to terminate your GAP insurance.
When a GAP Insurance Refund Is Not Available
Once more, good news. You can only receive a GAP insurance reimbursement in one circumstance. If you count not having GAP insurance at all, it makes two.
But let’s focus on the important one. You won’t be qualified for a refund for the remaining months of coverage if your insured car is deemed a total loss and your GAP policy pays out the difference between the car’s value and your loan balance. This is because the insurance company believes that they are no longer liable for paying claims under the policy because they have already met (or surpassed) their obligations under the GAP coverage you purchased.
How to Request a Refund from Your GAP Insurance Company
After discussing the conditions for a GAP refund, it’s time to discuss how to actually obtain one.
Factors to Take into Account When Cancelling Your GAP Insurance
Before we get into the specifics of requesting a GAP refund, there are a few items to consider that might influence your choice:
- Only the unused portion of your GAP insurance will be refunded to you. For instance, if you pay for a year of coverage but decide to cancel your insurance after three months, you will only receive a refund for the remaining nine months.
- Your method of paying your insurance bill will determine how much money you get back. You cannot receive a refund if you pay monthly because you have already paid for the coverage you have already gotten. The amount of your return, if you paid for your insurance all at once, will depend on how long you had been covered at the time you canceled your policy.
- It usually takes four to six weeks to get your money after canceling your policy and requesting a refund.
- Requesting a GAP insurance refund is required. The majority of insurance firms don’t always provide them.
How to Cancel Your GAP Insurance Policy Instructions
Here are the detailed instructions. The actions listed below are predicated on you purchasing GAP insurance from your insurance company rather than the car dealership. (Hint: Getting it from your insurance company will cost you far less.)
- Contact your insurance company to begin the reimbursement procedure. Inform them that you wish to terminate your GAP insurance and receive a refund for the remaining coverage, along with your name and policy number. Remember, wait to do this until after your car has been lawfully sold, traded, or paid off your loan.
- To establish that your car was traded in, sold, or that you paid off your loan early, gather the necessary documentation and mail it to your insurance company.
- Any forms that your insurance provider requires for concluding the cancellation procedure should be filled out and sen
- Reiterate to your provider that you want a return for the unused GAP insurance coverage if anything is still unclear. Within four to six weeks of your request to cancel, the majority of insurance providers will send you a check for your return.
