How do I cancel my GAP car insurance?

Many factors go into purchasing a new vehicle. The first and most important aspect of modern vehicle purchases is the price. Drivers need to know that the car they want to buy fits into their budget.

Some buyers choose to pay cash for their vehicles, meaning that they need to find a car that fits their cash budget. Others finance some of their vehicles. This means that they give money down on a new car and fund the remainder of the car. Others, still, decide to finance the entire purchase of their car by not putting anything down.

This means buyers need to find a car that fits into their budget based on the monthly payments of the vehicle. Another factor that should be considered is the price of car insurance for the car model you are looking to buy.

What Does A Gap Insurance company Do for Borrowers?

Whether you finance part or all of your car, there may be some overlap when you go underwater on your loan. In other words, you may be paying a loan that’s higher than the value of your car. If you get in an accident that results in a total loss, you would still have to pay off the gap between your car value and loan amount. (For more information, read our “Can my car insurance overlap?“).

Gap insurance comes in different forms. Some cover up to one month’s difference in payments. Others will cover the entire gap amount. Either way, you won’t be on the hook for the whole unearned portion if your car is a total loss.

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Why Do Buyers Need Gap Insurance?

How can buyers hold a loan for more than their car is worth? Buyers who choose to finance all or some of their vehicles are often more concerned with the monthly payments of the vehicle loan than of the price of the car itself.

Many buyers want vehicles they cannot afford, which means they are willing to do whatever it takes to lower the monthly payment, including stretching out the payments on a loan with a longer term. If you’re buying a brand new car, your car value drops as soon as you drive off the lot. Your loan balance does not.

If everything goes well, buyers may never need to use gap insurance. Unfortunately, there are no Gap insurance refunds. You buy it for peace of mind and use it if applicable. If you don’t use it, the insurance company still covered the associated risk.

How Does Depreciation Affect A Gap Insurance Provider?

Being upside down in a vehicle means that the total value of the car is less than the amount of money that the owner owes on the vehicle loan. Buyers who put nothing down and drive off the lot are more than likely going to be upside down several thousand dollars, instantly.

Some cars lose as much as 30 percent of its value the moment it is driven off of a dealer’s lot. Of course, this puts the borrower at risk. For car dealers and lenders, not requiring down payments means they can sell higher priced products to more people.

Buyers who put nothing down and drive off the lot are more than likely going to be upside down several thousand dollars, instantly.

What can you do about depreciation that outpaces your car payoff? There are some steps that you can take to get out of that upside down car loan.

Value of the Car

If a vehicle is in an accident and determined a total loss, it cannot be fixed. This means that the insurance company will pay off the value of the car, but that will do nothing for those who owe more on their vehicle than it is worth. At this point, it’s too late if you didn’t sign up with a Gap insurance company. This could happen as soon as you drive off the lot or years down the road. (For more information, read our “What happens if my car is totaled and I have GAP insurance?“).

A vehicle that depreciated off the lot may be worth $25,000 now, but the amount of money the owner still owes may be well over $30,000.

This means that the owner of this vehicle now owes an additional $5,000 for a car that they will never again drive.

The Benefits of GAP Insurance

Vehicle owners who are worried about being upside down on their vehicle can purchase something called GAP insurance (Guaranteed Asset Protection).

If a person’s car is totaled in an accident, stolen and not recovered and damaged beyond repair the GAP insurance will cover the difference between what the vehicle is worth and what the vehicle owner owes on the vehicle. You also should consider gap insurance for a leased car.

The GAP insurance plan must be purchased separately from the vehicle, and it must be obtained from the same lender who financed the car.

Depending on the company that holds the loan for the car and the GAP insurance, there may be other benefits as well.

Read more: How much is car insurance for a leased car?

GAP Cancellation Policy

GAP insurance plans can be canceled just like any other plan. However, many people choose to withdraw their GAP coverage for various reasons.

Here are a few reasons as to why they cancel:

• Vehicle is sold
• Vehicle is paid off
• Car is traded in

In this case, the amount of money that the person paid for the GAP plan is returned to them for a refund.

Many companies allow GAP cancellation refunds only before 90 days have passed; others prorate the amount of the GAP insurance based on the length of the contract and provide a refund of that amount.

Canceling GAP Insurance

To cancel a GAP insurance policy, the owner of a vehicle must contact the financial institution that holds the loan on the car. The owner must then request their GAP insurance is canceled.

They will receive a form in the mail that they must fill out, sign and date, and return to the lender for a refund and finalize the cancellation process.

For further information, vehicle owners can contact the loan holder of their vehicle to inquire about their specific GAP cancellation policies.

It is essential that drivers not cancel their GAP insurance if they cannot afford to pay the excess amount of money owed on the car in the instance something happens to it.

Before applying for a vehicle loan, buyers should compare the GAP policies of their favored lenders to see which one will make the most financial sense.

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