You may choose to stop gap insurance on your vehicle if you are selling it, trading it in or no longer wish to carry the protection that gap insurance offers.
How to Stop Gap Coverage
The first step to stop gap insurance is to find your original gap insurance contract. If you cannot locate it, contact the program administrator or the dealership if you purchased your car at one. Once you find the contract, read it thoroughly. The disclosures on the front or the back of the contract may tell you the office or person to contact if you plan to cancel your policy. If your contract is not clear, contact the insurance company directly. You may be asked to contact the finance manager at your dealership if you purchased your vehicle at one.
In either case, you will be given a cancellation form that must be completed in full and signed, stating that you wish to stop gap coverage. Before completing this form, think about your situation. If you still have an outstanding balance on your auto loan and are considering stopping your gap insurance, be sure to think twice about your choice. Gap insurance provides great protection in the event your car is declared a total loss by an insurance company after an accident. Gap insurance will pay the difference between what is owed on your loan and the fair market value of the vehicle at the time of the accident. On certain imported vehicles and heavy-duty trucks, this can amount to thousands of dollars of protection for a relatively low price. If you are selling or trading in your vehicle, it makes sense to cancel gap coverage, but if you have a loan balance that is greater than the trade-in/wholesale value of your vehicle, it is recommended that you keep gap coverage until the balance is lower or the loan is paid off altogether.
Collecting Your Refund
After submitting your cancellation form, check your contract once more. In many cases you will be due a pro-rated refund from the insurance company based on the length of time that you kept your policy. If you have any questions regarding a refund, it's best to contact the administrators directly, as the dealership finance manager may not know the specifics of the insurance company's policy. If you are due a refund, give the insurance company up to a few months to process the refund. If you don't receive the refund within a reasonable time frame, contact the insurer to confirm the policy is canceled, as you may find that your paperwork was mysteriously "lost" because you were trying to cancel a contract that was very profitable to the insurance company or the dealership.
In any case, it is very easy to stop gap car insurance as long as you are patient and take the time to read your contract in full. Determine your responsibilities and obligations in cancelling the coverage. As with any insurance policy, be sure to consider the risks and benefits of cancelling your policy before doing so.
Related Questions and Answers
What is Gap Insurance Used For?
If you find yourself in an upside down loan, where you owe more than the value of the car you've bought, your loan company may require you to obtain what is called GAP insurance. Regular comprehensive and collision policies will only pay out the value of the vehicle upon total loss. If this is the only coverage you have, your loan provider may end up losing money on the loan if a total loss occurs in the first few months of the loan. Gap insurance provides for the gap between what is owed and what the car is worth in this time frame.