Gap insurance refunds are possible in many scenarios, but the details are often buried in the fine print of the policy.
Published on March 3rd, 2021. Last Updated on .
GAP insurance is a great way to protect you in the event that your car is totaled before you pay it off. However, if you do not fully use it and pay your car off early, you should be able to get a refund for the amount that is left. Today, we will look at what GAP insurance is, what it costs, and how you can get a refund from your unused GAP insurance.
What Is GAP Insurance?
When purchasing insurance for your vehicle, you might be asked to purchase gap insurance. Gap insurance covers the difference (gap) between what your vehicle’s current value is and the amount that you still owe on it.
Do I Need Gap Insurance?
Gap insurance is not for everyone, in fact, there are certain criteria that you should consider before purchasing GAP insurance. If you meet the following criteria, you may want to purchase GAP insurance.
- When you purchased your vehicle, you made less than a 20% downpayment.
- You financed your vehicle for 60 months or more.
- You are leasing a vehicle (this is usually a requirement when leasing).
- The vehicle you purchased depreciates faster than your average vehicle.
- You have rolled over negative equity from your old car loan to the new loan.
How Much Does Gap Insurance Cost?
GAP insurance can be purchased from the dealership you purchased your vehicle from, the bank that is financing your car, or an auto insurance provider. While there is not a set value on every GAP insurance plan, there are a few factors that will affect your GAP insurance cost. Your insurance provider will take into consideration your car’s actual cash value (ACV), your age, where you live, and your auto insurance history. You can speak to your auto insurance provider if they offer GAP insurance and if they can give you an accurate quote.
Can I Get A Refund From My Gap Insurance?
When paying off your vehicle early, you may be entitled to a refund from your GAP insurance if it has not been fully used. GAP insurance premiums will be determined by the purchase price of the vehicle and the loan term. Paying off your vehicle early may mean you get a refund, but it will not be for the total amount of GAP coverage purchased. You will need to provide the loan payoff notice to your insurer to get this refund.
How To Calculate A GAP Insurance Refund?
Now that you know that you can get a GAP insurance refund, you are probably wondering just how much you can get back. If you paid the full GAP insurance cost upfront, you can use the following calculation to determine your refund.
- Check your policy’s expiration date and how much your GAP insurance costs you.
- Divide that amount by the number of months that your policy covers.
- Multiply the price-per-month by the number of months that you have left on your GAP insurance.
How To Get Gap Insurance Refund?
In order to get a GAP insurance refund, you will need to contact your insurance provider and provide your policy number and the loan payoff documents. This usually only applies to policies that were paid in full upfront.
If you are canceling the plan in the first 30 days of your policy’s start date, you may be able to receive a refund in full, sans cancellation fees. It is important to check the details of your policy to find the exact details for your policy.
How Long Does It Take To Get A Gap Insurance Refund?
Once you have filed your refund request with your insurer, you should expect 4-6 weeks to get your refund. It is important to stay in contact with your provider to ensure that any paperwork they send over is getting signed to speed up the process.