How to Stop Gap Insurance Coverage
- 1). Confirm you no longer need to carry the gap insurance extra coverage on your car before canceling. According to Edmunds.com “Why do you need it? Your car depreciates about 20 percent as soon as you drive it off the lot, and it continues to depreciate significantly for the first two or three years. If your car were to be stolen or totaled during this time, gap insurance would pay you the actual cash value (ACV) of your car. Your loan amount could be significantly more, however, leaving you on the hook for the difference.” Edmunds recommend that if you are a consumer with a new car the following factors would determine if you need to keep the insurance to: “make a down payment of less than 20 percent, roll negative equity from a previous car loan into a new car loan, finance for 72 months or more, finance a vehicle that depreciates very quickly (luxury, highly optioned, many domestic vehicles), lease a vehicle.”
- 2). Read your contract to understand the terms for cancellation of the gap insurance. If you do not understand what you are reading, please contact the administrator of the insurance to get a better grasp of the policy.
- 3). Verify the state requirements for canceling your contract. According to Edmunds.com “Some states don't allow cancellation after 30 or 60 days, while others allow you to cancel any time during the loan and will even apply a prorated refund to your outstanding balance.”
- 4). Fill out the documentation that will allow you to terminate the gap insurance. Some companies may send you a form by fax or mail to complete. This will immediately stop the coverage once the provider receives and process the form.
- 5). Check to see if you will receive a refund for any previously paid portion of the insurance. According to Carsdirect.com “After submitting your cancellation form, check your contract once more. In many cases you will be due a pro-rated refund from the insurance company based on the length of time that you kept your policy.”
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