How can you get a gap insurance refund?

Because gap insurance isn’t required, drivers can drop this policy at any time. Typically, drivers no longer need their coverage once the car's value is more than what they owe. If you cancel your gap insurance policy early you may qualify for a gap insurance refund of part of the premiums you paid.

The amount of the refund on your gap insurance depends on how you paid for the coverage and how much time is left on the loan.

To get a gap insurance refund, you'll need to meet a few criteria. You can't get a refund on gap insurance if you cancel the policy because the car was totaled, however. Read on to find out when a gap insurance refund may be available and how to get it.

Can you get a gap insurance refund?

Not every driver can get a gap insurance contract refund. Typically, refunds are available for drivers who pay off their auto loans early. You can also get a refund if you decide to sell or trade in your vehicle before paying off the loan.

In addition, refunds may only be available if you paid for gap insurance in full upfront.

"If the gap insurance premium was paid in full upon the purchase of your policy, you will likely get a refund for the difference," says Allyson Langhoff, a car dealership consultant in the greater New Orleans area. "Eligibility and amount will vary depending on the car's value, size of the loan, etc."

You need to work with your car insurance company to get a refund. To start the process, you must complete paperwork, provide a few forms, and then receive compensation for a portion of your premium.

What is a gap insurance refund?

A gap insurance refund is the money the insurance company pays back when you have canceled your policy early, typically after repaying your car loan. Drivers who cancel their gap insurance early can qualify for a gap insurance refund for a portion of their unused premiums.

How much will the gap insurance refund be?

Gap insurance refunds are different for every individual. The amount of money you get back after canceling your policy will depend on a few factors, including:

• The value of the vehicle
• The amount of money borrowed
• The mileage
• Loan repayment term

If you paid for your gap insurance upfront in one lump sum, you can probably get back a decent portion of the unused premium. However, your refund will be much smaller if you paid for your gap insurance monthly.

How do you calculate a gap insurance refund?

You can do a simple calculation to determine how much money you're owed. Take the total cost of your gap insurance, and divide it by the number of months you had coverage. Then, multiply the monthly premium by the number of months you have left on your policy.

Here's an example:

• Let's say you paid $1,000 for a policy that's valid for 36 months.
• Your gap insurance monthly payments would be about $27.
• Now imagine that you're able to repay your vehicle loan in full after just 20 months.
• You could get a refund from your gap insurance provider for the 16 months that you no longer need gap insurance, which would equal roughly $444.

How do you get a gap insurance refund?

If you want to cancel your gap insurance coverage to get a refund, you need to undergo a multistep process. The first step in getting a gap insurance refund is to contact your agent or insurance company and let them know that you want to cancel your policy.

The agent will provide paperwork for you to fill out and let you know what other information is required. Most insurance carriers need to see an odometer disclosure statement verifying the car's current mileage. You can get this free form from your state's DMV website.

If you cancel your gap insurance policy because your auto loan has been paid off, your insurance company might also request a letter from your lender verifying that the car loan was closed.

Once you've submitted all the necessary paperwork and documentation, you should receive your refund. Most insurance companies allow you to choose between a physical check or a direct deposit to your bank account.

When can you get a gap insurance refund?

Every insurance company is different, but you can usually get a gap policy refund at any point before the policy period expires.

So, if you purchase a gap policy for 48 months and you decide to sell your car after 12 months, you could request a refund.

When can't you get a gap insurance refund?

The only time you can't receive a gap insurance refund is once your policy has expired or if your vehicle gets totaled or stolen. It doesn't matter how long the policy has been active or how much money you borrowed.

How long does it take to get a gap insurance refund?

The amount of time it takes to receive a gap coverage refund depends on your insurance provider. Because gap insurance refunds involve paperwork, you can expect it to take at least a few weeks. You can ask your insurance agent when you should expect to get the money.

How do you cancel gap insurance coverage?

Gap insurance cancelation is an easy process, but there are multiple steps to follow.

According to Langhoff, "You should first review the terms of your policy for cancellations and review the total cost of the plan. Next, obtain an odometer disclosure statement to verify your mileage since this can affect how much you get refunded."

Langhoff then recommends notifying your insurance provider to get the cancellation paperwork. The last step is to submit the cancellation and refund forms with your odometer disclosure statement and a payoff letter if you've paid off the auto loan in full.

Frequently asked questions: Gap insurance refunds