You can usually get a gap insurance refund if your car was traded in, sold, or paid off early. Gap insurance refunds are not given simply because you never filed a gap insurance claim and they usually require policies to have been paid in full up front.
If you are cancelling within 30 days after the policy’s start date, you might be able to get a full refund, minus any cancellation fees. In other cases, only a partial refund may be possible. The details will depend on your policy and your state’s laws.
When You Can Get a Gap Insurance Refund
- You are paying off, selling, or trading in the covered car.
- You are switching to a different gap insurance company.
- Your loan balance is no longer more than the car’s actual value, though it’s best to leave a cushion of $1,000-$2,000.
If you need a gap insurance refund because you’re selling or trading in the car, be sure to wait until the car no longer legally belongs to you before canceling your gap insurance. Then, you will need to give the appropriate paperwork to your insurance provider, such as proof of sale or auto payoff letter.
Some gap insurance companies might also require an odometer verification showing the mileage on your car, which you can get from a dealership before you sell or trade in the vehicle.
Similarly, if you’re refinancing, wait to cancel your gap insurance until your previous loan is no longer in effect.
When You Cannot Get a Gap Insurance Refund
On the other hand, drivers cannot get a gap insurance refund if the insured car is declared a total loss before the policy’s expiration date. In this case, the gap insurance will pay for the difference between the car’s value and the loan balance, but drivers will not be eligible for a refund for the remaining months of coverage.
How Long Does It Take to Get a Gap Insurance Refund?
Gap insurance refunds usually take 4-6 weeks. Staying in contact with your gap insurance provider and promptly returning signed paperwork can expedite the process, though.