How To Cancel GAP Insurance
While knowing how to cancel GAP insurance is important, coverage needs to stay in place as long as you owe more than your car is worth. GAP coverage, as well as full coverage car insurance, can be required by the lender. Canceling GAP insurance can result in the lender buying much more expensive force-placed insurance on your behalf. With GAP coverage, save money on car insurance by adding discounts and raising deductibles.
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Eric Stauffer
Licensed Insurance Agent
Eric Stauffer is an insurance agent and banker-turned-consumer advocate. His priority is educating individuals and families about the different types of insurance coverage. He is passionate about helping consumers find the best coverage for their budgets and personal needs. Eric is the CEO of C Street Media, a full-service marketing firm and the co-founder of ProperCents.com, a financial educat...
Licensed Insurance Agent
UPDATED: Jan 9, 2024
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Our car insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different car insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about car insurance. Our goal is to be an objective, third-party resource for everything car insurance-related. We update our site regularly, and all content is reviewed by car insurance experts.
UPDATED: Jan 9, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident car insurance decisions. Comparison shopping should be easy. We are not affiliated with any one car insurance provider and cannot guarantee quotes from any single provider.
Our car insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different car insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- GAP insurance covers the difference between what you owe on your vehicle and what it’s worth
- Most lenders require GAP insurance in addition to full coverage car insurance
- You can cancel GAP insurance once you owe less than your car’s worth
If you lease or finance a car, you’ll probably have to carry GAP insurance. GAP, or Guaranteed Asset Protection, pays the difference between what your vehicle is worth and what you owe if it’s totaled or stolen.
However, with a financed vehicle, at some point, you won’t need GAP coverage any longer. So knowing when and how to cancel GAP insurance saves you money.
Keep in mind that most lenders require full-coverage car insurance in addition to GAP coverage. Adding more coverage better protects their investment.
Keep reading to learn how to cancel GAP insurance and when you don’t need the extra coverage.
What is GAP car insurance?
Buying or leasing a new car is exciting. However, a lot of extra costs come along with that new car. Unfortunately, GAP insurance is something most new car buyers don’t consider when adding up costs.
How does GAP car insurance work?
Cars depreciate about 20% in their first year. As a result, you typically owe more than the car is worth as soon as you drive it off the lot. GAP insurance covers that difference for a total loss.
For example, let’s say you bought a car for $50,000, and it’s now worth $40,000. GAP coverage pays that $10,000 difference if the vehicle is stolen or totaled.
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The dealer will offer car insurance, including GAP coverage, when you buy or lease a car. However, you don’t have to get car insurance through your dealer. It’s much more expensive than if you look for coverage on your own.
How long does GAP insurance last?
GAP insurance isn’t costly, and you don’t have to carry it forever. In addition, because your state does not require it, you can cancel it as soon as you owe less than your car is worth.
Additionally, you won’t be required to carry GAP insurance if you paid cash for your vehicle or put down a substantial down payment.
Keep in mind that GAP insurance only pays for a complete loss of your vehicle. GAP insurance does not cover repairs, parts, missed payments, and wear and tear.
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How do you cancel GAP insurance?
Canceling GAP insurance is pretty easy. Simply contact your car insurance company and remove the coverage. You may even be able to handle it yourself online or through the company’s app.
However, if you have insurance through your dealer or lender, you will have to call them to find out how to cancel GAP insurance.
You may have to submit a cancellation form, mileage documentation, and other forms. Your car insurance company or dealer can provide you with cancellation requirements.
If you’ve paid in advance for GAP coverage, you should get a prorated refund. However, if your insurance has paid a claim for a stolen or totaled vehicle, you won’t receive a refund for the GAP coverage.
Remember, if you have a lease or contract through a lender, it will probably determine exactly when you can cancel GAP coverage. Removing mandatory coverage costs you time and money.
For example, your lender can purchase car insurance for you if you don’t carry the necessary coverages. According to the Consumer Financial Protection Bureau, the lender can require force-placed insurance, which is much more expensive than the coverage you can find yourself.
Do you have to have full coverage with GAP insurance?
GAP insurance through a dealer costs around $500 a year. However, GAP coverage through a car insurance company costs a fraction of that.
Your lender and the car insurance company will probably require full coverage car insurance in addition to GAP coverage. Full coverage combines liability, collision, and comprehensive coverages. So, not only are property damages and bodily injuries to others covered, but your vehicle is covered as well.
While full coverage offers more protection, rates are also higher. This table shows average annual car insurance rates based on coverage types from top companies.
Average Annual Car Insurance Rates Based on Coverage Type
Company | Average Annual Rate for Low Coverage | Average Annual Rate for Medium Coverage | Average Annual Rate for High Coverage |
---|---|---|---|
Allstate | $4,628.03 | $4,896.81 | $5,139.02 |
American Family | $3,368.49 | $3,544.37 | $3,416.40 |
Farmers | $3,922.47 | $4,166.22 | $4,494.13 |
Geico | $3,001.91 | $3,213.97 | $3,429.14 |
Liberty Mutual | $5,805.75 | $6,058.57 | $6,356.04 |
Nationwide | $3,394.83 | $3,449.80 | $3,505.37 |
Progressive | $3,737.13 | $4,018.46 | $4,350.96 |
State Farm | $3,055.40 | $3,269.80 | $3,454.80 |
Travelers | $4,223.63 | $4,462.02 | $4,619.07 |
USAA | $2,404.11 | $2,539.87 | $2,667.92 |
Rates only increase around $30 a month to add collision and comprehensive coverages. In addition, GAP coverage costs about 5% of collision and comprehensive rates. So while GAP coverage doesn’t raise car insurance rates very much, full coverage does.
How can you save on full-coverage car insurance?
Because full coverage offers more protection, rates also increase. The good news is that there are ways to lower those increased rates.
First, take advantage of car insurance discounts. Insurance companies offer a variety of discounts based on the driver, policy, and vehicle. You can bundle savings such as multi-car and safe-driver discounts. You can even get discounts based on your car’s safety features.
This table shows car insurance discounts from top companies. The savings amount is listed if it is available.
Car Insurance Discounts
Car Insurance Discounts | Allstate (%) | American Family (%) | Farmers (%) | Geico (%) | Liberty Mutual (%) | Nationwide (%) | Progressive (%) | State Farm (%) | Travelers (%) | USAA (%) |
---|---|---|---|---|---|---|---|---|---|---|
Adaptive Cruise Control | N/A | N/A | N/A | N/A | 5 | x | x | N/A | N/A | N/A |
Adaptive Headlights | N/A | N/A | x | N/A | 5 | x | x | N/A | N/A | N/A |
Anti-lock Brakes | x | x | x | 5 | 5 | 5 | x | 5 | x | x |
Anti-Theft | x | x | x | 25 | 20 | 25 | x | 15 | x | x |
Claim Free | x | x | x | 26 | x | 10 | x | 15 | 23 | 12 |
Continuous Coverage | x | x | x | x | N/A | N/A | x | N/A | 15 | N/A |
Daytime Running Lights | x | x | x | 1 | 5 | 5 | x | N/A | x | x |
Defensive Driver | x | x | x | x | 10 | 5 | 10 | 5 | 10 | 3 |
Distant Student | x | x | x | x | N/A | 10 | x | x | 7 | x |
Driver's Ed | x | x | x | x | 10 | N/A | 10 | 15 | 8 | 3 |
Driving Device/App | x | x | N/A | x | 30 | 40 | 20 | 50 | 30 | 5 |
Early Signing | x | x | x | x | N/A | 8 | x | N/A | 10 | 12 |
Electronic Stability Control | x | x | x | N/A | 5 | x | x | N/A | N/A | N/A |
Emergency Deployment | N/A | N/A | N/A | 25 | N/A | N/A | N/A | N/A | N/A | N/A |
Engaged Couple | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
Family Legacy | N/A | x | N/A | x | N/A | N/A | x | N/A | N/A | 10 |
Family Plan | N/A | x | x | N/A | N/A | 25 | N/A | N/A | N/A | N/A |
Farm Vehicle | x | N/A | x | x | N/A | N/A | N/A | N/A | N/A | N/A |
Fast 5 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
Federal Employee | N/A | N/A | x | 8 | 10 | N/A | N/A | N/A | N/A | N/A |
Forward Collision Warning | N/A | N/A | N/A | N/A | 5 | x | x | N/A | N/A | N/A |
Full Payment | N/A | x | x | x | $5 | N/A | x | N/A | 7.5 | N/A |
Further Education | N/A | N/A | N/A | x | 10 | 15 | N/A | N/A | x | N/A |
Garaging/Storing | N/A | N/A | x | N/A | N/A | N/A | N/A | N/A | x | 90 |
Good Credit | x | x | N/A | N/A | N/A | x | x | x | N/A | N/A |
Good Student | x | x | x | 15 | 22.5 | 10 | x | 25 | 8 | 3 |
Green Vehicle | x | N/A | 5 | N/A | 10 | N/A | N/A | N/A | 10 | N/A |
Homeowner | N/A | N/A | x | x | x | 5 | x | 3 | 5 | N/A |
Lane Departure Warning | N/A | N/A | N/A | N/A | x | x | x | N/A | N/A | N/A |
Life Insurance | x | N/A | N/A | N/A | N/A | x | N/A | N/A | N/A | N/A |
Low Mileage | x | x | x | x | x | x | x | 30 | x | x |
Loyalty | N/A | x | N/A | x | N/A | 5 | x | N/A | N/A | x |
Married | N/A | N/A | N/A | N/A | x | x | x | x | N/A | x |
Membership/Group | N/A | N/A | N/A | x | 10 | 7 | N/A | N/A | x | N/A |
Military | x | N/A | x | 15 | 4 | N/A | N/A | x | N/A | x |
Military Garaging | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 15 |
Multiple Drivers | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
Multiple Policies | 10 | 29 | x | 10 | 20 | 10 | 12 | 17 | 13 | x |
Multiple Vehicles | x | x | x | 25 | 10 | 20 | 10 | 20 | 8 | x |
New Address | N/A | N/A | N/A | N/A | 5 | N/A | N/A | N/A | N/A | N/A |
New Customer/New Plan | N/A | N/A | N/A | N/A | x | N/A | N/A | N/A | N/A | N/A |
New Graduate | N/A | N/A | N/A | N/A | 5 | N/A | N/A | N/A | N/A | N/A |
Newer Vehicle | x | N/A | x | x | N/A | x | x | 40 | 10 | 12 |
Newly Licensed | N/A | N/A | N/A | N/A | 5 | N/A | N/A | N/A | N/A | N/A |
Newlyweds | N/A | N/A | N/A | N/A | 5 | N/A | N/A | N/A | N/A | N/A |
Non-Smoker/Non-Drinker | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
Occasional Operator | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | x |
Occupation | x | N/A | x | x | 10 | 15 | N/A | N/A | x | N/A |
On-Time Payments | x | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 15 | N/A |
Online Shopper | N/A | N/A | N/A | N/A | N/A | N/A | 7 | N/A | N/A | N/A |
Paperless Documents | x | x | x | N/A | N/A | 5 | $50 | N/A | N/A | N/A |
Paperless/Auto Billing | x | x | x | N/A | x | $30 | x | $2 | 3 | 3 |
Passive Restraint | x | x | x | 40 | x | 20 | x | 40 | x | x |
Recent Retirees | N/A | N/A | N/A | N/A | 4 | N/A | N/A | N/A | N/A | N/A |
Renter | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
Roadside Assistance | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
Safe Driver | N/A | N/A | x | 15 | N/A | 35 | 31 | 15 | 23 | 12 |
Seat Belt Use | N/A | N/A | N/A | 15 | N/A | N/A | N/A | N/A | N/A | N/A |
Senior Driver | x | N/A | x | N/A | N/A | N/A | N/A | N/A | N/A | x |
Stable Residence | N/A | N/A | N/A | N/A | N/A | x | x | N/A | N/A | N/A |
Students & Alumni | N/A | x | N/A | x | 10 | 7 | N/A | N/A | N/A | N/A |
Switching Provider | N/A | x | x | N/A | 10 | N/A | x | N/A | N/A | N/A |
Utility Vehicle | x | N/A | x | x | N/A | N/A | N/A | N/A | N/A | N/A |
Vehicle Recovery | x | x | x | 15 | 35 | 25 | x | 5 | x | x |
VIN Etching | N/A | N/A | x | N/A | 5 | x | x | N/A | x | x |
Volunteer | N/A | x | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
Young Driver | N/A | N/A | N/A | N/A | x | N/A | x | N/A | N/A | $75 |
Next, raise your deductibles. Your deductible is how much you must pay before your car insurance kicks in. Although raised deductibles increase your out-of-pocket costs, they also keep your overall rates low.
Finally, shop around for coverage. Every insurance company weighs your factors differently. Compare multiple companies to find full coverage and GAP insurance with the lowest rates available to you.
Enter your ZIP code below to view companies that have cheap auto insurance rates.
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Case Studies: Examples of How to Cancel GAP Insurance
Case Study 1: John’s Car Loan Paid Off Early
John purchased a car and financed it with a five-year loan. At the time of purchase, he also obtained GAP insurance to protect himself in case of a total loss. However, John diligently made extra payments on his car loan and managed to pay it off in just three years. Since his loan was paid off early, John realized that he no longer needed GAP insurance.
He contacted his insurance provider and informed them about the early loan payoff. The insurance provider guided him through the cancellation process and refunded the remaining premium for the unused portion of his GAP insurance policy.
Case Study 2: Emily’s Car Depreciated Rapidly
Emily leased a brand new car and obtained GAP insurance to cover the gap between the car’s value and her lease obligations. However, within the first year of the lease, the car’s value depreciated significantly due to an oversaturated market for that particular model. Emily realized that the gap between the car’s value and her lease obligations had diminished to a negligible amount.
She decided to cancel her GAP insurance to save on premiums. Emily contacted her insurance provider, provided documentation of the car’s current value, and requested cancellation of the GAP insurance policy. The insurance provider processed the cancellation and adjusted her premiums accordingly.
Case Study 3: Sarah Sells Her Financed Car
Sarah financed a car and purchased GAP insurance to protect herself in case of a total loss. However, after a couple of years, Sarah decided to sell her car and pay off the remaining loan balance. As she no longer owned the car and had no outstanding loan, the need for GAP insurance was no longer relevant. Sarah contacted her insurance provider and informed them about the car sale and loan payoff.
The insurance provider assisted her with canceling the GAP insurance policy and refunded the unused portion of the premium. Sarah was able to save money by canceling the coverage she no longer needed.
Case Study 4: Michael Switches to a Different Insurance Provider
Michael had a financed car with GAP insurance provided by his auto lender. However, he found a better deal on his car insurance with a different provider that offered lower premiums for the same coverage. Michael decided to switch his car insurance to the new provider but wanted to cancel his GAP insurance as well.
He contacted his auto lender to inquire about canceling the GAP insurance policy and was informed that he needed to contact his insurance provider directly. Michael reached out to his insurance provider, informed them about the policy cancellation, and requested the termination of his GAP insurance.
The insurance provider processed the cancellation, and Michael was able to save money by switching to a more affordable car insurance policy without GAP coverage.
How To Cancel GAP Insurance: The Bottom Line
GAP insurance is necessary if you owe more than your vehicle is worth. Although GAP coverage is not required by law, most lenders require it in addition to full coverage car insurance to protect their investment.
While canceling GAP insurance is relatively simple, your lender may require you to keep the coverage. If you cancel anyway, your dealer or lender can purchase much more expensive coverage on your behalf.
Add discounts and raise deductibles to save money on car insurance with GAP coverage. In addition, find lower rates by shopping around for coverage.
Now that you know how to cancel GAP insurance check with your lender before you drop the coverage.
Frequently Asked Questions
How To Cancel GAP Insurance
To cancel your GAP (Guaranteed Asset Protection) insurance, you should follow these five steps:
- Contact your GAP insurance provider: The first step in cancelling your GAP insurance policy is to contact the provider. You should look for the provider’s contact information on your policy documents, such as the phone number or email address.
- Request cancellation: Once you have contacted the GAP insurance provider, you should request to cancel your policy. They may ask you for some information, such as your policy number, personal details, and the reason for cancellation.
- Provide any required documentation: Depending on your policy and the provider’s requirements, you may need to provide additional documentation to support your cancellation request. For example, you may need to provide proof that you have sold or traded in your vehicle.
- Confirm cancellation details: Once the provider has processed your cancellation request, they will provide you with confirmation of the cancellation details, including any refunds due to you.
- Follow up: It is a good idea to follow up with your provider to confirm that your policy has been cancelled and that any refunds have been processed.
Note that some providers may charge a cancellation fee or have specific cancellation policies. Make sure to review your policy documents or contact the provider directly to understand any applicable terms and conditions.
Can I cancel my GAP insurance at any time?
Yes, you can cancel your GAP insurance at any time. However, keep in mind that you should only cancel it once you owe less than your car is worth.
How much can I save by canceling my GAP insurance?
The amount you can save by canceling your GAP insurance depends on your individual circumstances. However, if you owe less than your car is worth, you may be able to save a significant amount of money on your insurance premiums.
Will I get a refund if I cancel my GAP insurance?
You may be eligible for a refund if you cancel your GAP insurance. However, the amount of the refund will depend on the terms of your policy and how much you have already paid in premiums.
Can I cancel my GAP insurance if I have already made a claim?
No, you cannot cancel your GAP insurance if you have already made a claim. The policy will remain in effect until the claim is resolved, and you may still be required to pay any outstanding premiums.
Enter your ZIP code below to view companies that have cheap auto insurance rates.
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Eric Stauffer
Licensed Insurance Agent
Eric Stauffer is an insurance agent and banker-turned-consumer advocate. His priority is educating individuals and families about the different types of insurance coverage. He is passionate about helping consumers find the best coverage for their budgets and personal needs. Eric is the CEO of C Street Media, a full-service marketing firm and the co-founder of ProperCents.com, a financial educat...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about car insurance. Our goal is to be an objective, third-party resource for everything car insurance-related. We update our site regularly, and all content is reviewed by car insurance experts.