Do I Get My Gap Insurance Back After I Pay Off My Car?

Paying off your car comes with a sense of freedom. You are no longer shackled to a monthly car payment. Many dealers offer GAP insurance to borrowers to help cover the vehicle in case of an accident. Check your paperwork to see if you bought GAP insurance. With a payoff notice in your hand, you may be entitled to a partial refund of your GAP insurance premium if you paid off your vehicle early.

Guaranteed Auto Protection insurance -- or GAP insurance -- covers the difference between the amount you owe on the loan and the actual value of the vehicle. Auto insurance policies total out vehicles for the actual cash value (ACV) of the car -- not how much you owe on the note. For example, if you owe $20,000 on your new car but it is totaled out at $15,000, you get a stuck with a $5,000 bill. If you purchase GAP insurance, it will cover the other $5,000.

You do not get your full GAP coverage refunded back to you once you pay off your car. When you pay your GAP insurance premium in advance, you are entitled to a refund of the unused portion if you pay off your vehicle early. If you pay your GAP coverage in monthly installments, you are not entitled to a refund of any used premiums. You may receive a small refund if you cancel early in the month.

Contact your GAP insurance provider to obtain the necessary forms to cancel your GAP insurance. You need to provide a copy of an odometer disclosure statement, which you can get from an auto dealership. You need a copy of your auto loan payoff showing the date you paid off the vehicle and the GAP coverage cancellation forms. Provide all this documentation to your GAP provider. The company issues a refund if applicable.

Your GAP insurance provider may not advertise that you are due a refund. Your loan payoff letter may state you are entitled to a refund if you purchased GAP insurance -- but you won’t automatically receive a check. You must contact the insurance provider to cancel the policy and collect any monies owed to you. Because your paperwork must be processed, expect the process to take between four to six before you receive a refund check.