Can you cancel your gap insurance when you feel you no longer need
Yes, usually you can cancel
if you determine that you no longer need it.
Gap insurance policies, terms and fees vary. To find out about
how to cancel your existing gap insurance policy, you'll need to
read through the contract you have with your gap insurance
provider. If you still have questions, contact the insurer
If you just purchased the policy, depending upon your gap
insurance company, it may be possible that if you cancel within a
certain time period (typically 30 days) you can receive a full
refund. A cancellation fee may apply. (See "
What you need to know about gap insurance
After that initial period, if you cancel the policy you normally
receive a refund
prorated according to the length of time that you kept the policy
in effect. You can't get a full refund since you've "used" a
portion of it already.
Also, any refund would be due you only if you had paid in full
upfront for the gap insurance policy. If your gap insurance
coverage were set up so that you paid a monthly amount for it (for
instance, included in with your monthly car loan), then you should
still be able to cancel the gap policy, but you shouldn't expect a
refund since the portion you paid each month would have been used
in that month already.
As you know, gap insurance covers the difference between the
actual cash value
(ACV) of a vehicle (which is what an insurance company would pay
out for a totaled vehicle) and what you actually owe on the lease
or loan. So, I'd warn you that before you cancel out
your gap insurance that you run the numbers.
If you're still upside-down on your car's loan (owe more than
it's worth), then gap insurance is likely still needed. If
you now owe less than the car's ACV, you could cancel your gap
insurance since it would not pay out if your car were totaled out
by an insurance company after an accident. (See "What gap
insurance does -- and does not -- cover")
If you no longer want your current gap insurance policy because
you believe you paid too much for it, then shop around to see if a
cheaper policy is possible. If it is, then see about
canceling out your current one before buying the new one.
If you bought your gap insurance through a dealership or finance
company, then it is quite possible that you could find a policy
with a credit union or auto insurance company for much less.
We recommend shopping around for gap insurance, just as you
should for the car insurance policy for a new car.
Comparison shopping with several auto insurance companies (or
gap insurers in your case) can save you hundreds of dollars, if not