Gap Insurance Refunds: How Do They Work?

When you finance a vehicle near Phoenix, you may decide to purchase gap insurance. While gap insurance isn’t a requirement like liability coverage, it can help to protect you in the event of a collision. However, since gap insurance only protects you in the event that you’re underwater, you might be able to secure a gap insurance refund if and when you no longer owe more than your vehicle is really worth!

What is Gap Insurance?

Before we show you how gap insurance refunds work, it makes sense to cover the basics:

• In the event of a collision that totals your vehicle, most insurance plans would pay out the vehicle’s real value–leaving you on the hook for any remaining loan balance.
• Gap insurance covers the difference between the real value of your vehicle and the current balance of your auto loan, so you can move forward without continuing to pay for a vehicle you no longer drive!

How Does a Gap Insurance Refund Work?

The price of gap insurance is based on a variety of factors, but if you’re curious about gap insurance refunds, the most important factors to keep in mind are the expected length of your loan and the rate at which you can pay down the balance. So, how does a gap insurance refund work? Here’s what you should know before you get started:

• Gap insurance refunds are generally only available to drivers who pay for gap coverage up front, all at once. If you’re paying for gap insurance in monthly installments, you probably won’t be eligible.
• In order to qualify for a gap insurance refund, you will need to cancel your policy or pay off the full loan balance before the expected deadline.

When Are You Eligible for a Gap Insurance Refund?

Generally, it’s only possible to cancel a gap insurance plan–and get a partial refund–within 30 days of your purchase. Here’s when that might be possible:

• If you bought gap insurance to protect yourself against the initial period of depreciation, but now you owe less on your loan than your vehicle is really worth, you may feel comfortable canceling your gap coverage.
• Call your insurance provider and ask about canceling your policy. If it’s a possibility, your gap insurance refund should take four to six weeks.

The most common gap insurance refunds are those that become available if your loan balance has been paid off! Here’s when that might be the case:

• You are selling or trading in the insured vehicle
• You are refinancing your vehicle
• You’ve paid off the entire loan ahead of schedule, and now own the vehicle

Not filing a gap insurance claim is not, in itself, enough to entitle you to a refund. But if you can show that you paid off your loan ahead of schedule, you might get some money back.

Gap Insurance Cancellation: Getting Your Refund

When you reach out to your gap insurance provider to ask about a refund, be sure to have the following information on hand:

• Documentation proving when and where you paid off your loan
• An odometer verification that shows the mileage on your car

Get Your Finance Questions Answered at Rocky’s Auto Credit

Here at Rocky’s Auto Credit, we’re ready to answer any and all of your auto financing and insurance questions. If you’re planning to purchase a vehicle from our dealership, don’t hesitate to reach out to our financing team before you drive in from Glendale or Tempe.