We can never tell when certain situations will arise. Some come unexpectedly, and it may take us time to get a handle on the situation. Likewise, in carlike situations, you never know when your car will get stolen or totaled. Generally, gap insurance was designed to offer peace of mind to policyholders in unforeseen events. How do you then get a gap insurance refund for your unused coverage if a situation like this occurs?
Read to the end of this article if you don’t want to miss out on tips on how to get gap insurance refunds. Beyond the tips, we aim to shed more light on how gap insurance works, how to calculate gap insurance, and other details that would help broaden your knowledge.
What is Gap Insurance?
As the name implies, gap insurance covers the gap between what you owe on your car loan and the depreciated value of your vehicle if there’s a situation where your car is damaged in a car accident.
How Does Gap Insurance Work?
We all know how fast a new car depreciates, so you’re taking the risk of taking out a loan to purchase a new or used car. However, if the deed has been done, there are ways to solve the issue.
If your car is damaged while your car loan principal balance is still on the high side, there’s a tendency to owe your lender the difference between the loan balance and the claim payout on your insurance. Now, this is where gap insurance comes into play. Gap insurance is an ideal option for the following reasons:
- If you’re leasing a car
- If you’re financing the car for a period of 60 months or longer.
- Your down payment is less than 20%
- You purchased a car that depreciates faster than the average car.
Also, you can get gap insurance from car dealers and car insurance companies, including banks and credit unions.
It is essential to note that, when purchasing gap insurance, you’ll be required to pay your premiums monthly or as a lump sum. When you pay in a lump sum, it means you may get refunded for the unused coverage later on. Those who pay monthly may get a smaller refund if they have a motive for canceling their insurance early in the month.
How to Calculate Gap Insurance Refund
The amount of refund you get under your gap insurance policy depends on the cost of your premium and how long it has been on your current policy. For instance, if you purchased gap insurance in early January and decided to cancel in late April, you may qualify to get a refund that equates to eight months of your unused coverage.
If your annual premium is $60, divide it by 12 months, which denotes $5 per month. If you are considered eligible by your insurance company, then you can get a refund of $40 for the unused eight months on your policy.
When You Can Get a Gap Insurance Refund
There are multiple reasons that qualify you for gap insurance refunds, such as when:
- You sold your vehicle.
- You no longer want or need the vehicle.
- You switch to another gap insurance company.
- You paid off your auto loan or part payment that was less than the car’s actual cash value.
When You Cannot Get a Gap Insurance Refund
In most cases, you have the right to cancel your gap insurance and request a refund for your unused coverage. However, there are situations that make you ineligible to get a refund, such as when:
- Your gap insurance policy has expired.
- You have not paid your gap policy premium.
- It is past the deadline by which you can formally make a claim.
How to Cancel Gap Insurance and Get a Refund
If you’ve decided to cancel your gap insurance and you intend to get a refund, there are ways to go about it. We have helped to curate steps on how to cancel gap insurance and get a refund for your unused coverage, which are as follows:
- If you want to switch to another gap insurance company, the first thing is to ensure that you have a new policy ready that will take effect immediately after you cancel your existing policy. This is done to prevent lapses in your car coverage.
- Reach out to your gap insurance company and request the cancellation of your gap insurance. State that you want to get a refund for your unused coverage.
- Gather all the documents required to get a refund for your gap insurance. Documents can include proof of a vehicle sold or traded and verification of your vehicle’s current mileage.
- Fill out and submit all required documentation that ascertains your eligibility to get a gap insurance refund.
If you follow the aforementioned process, you will be able to cancel and get a refund for your gap insurance. Beyond the steps we have provided, ensure you adhere strictly to other procedures specified by your insurance provider.
FAQs
Can you get a gap insurance refund after a total loss?
If there’s a situation where your car is deemed a total loss and the coverage under your gap insurance is capable of paying the difference between what you owe on your car loan and the actual cash value, it’s likely you don’t qualify for a refund for the months remaining on your policy.
How Long Does It Take to Get a Gap Insurance Refund?
The period it takes to get gap insurance depends on your state and the insurance company. However, the typical payout for a gap insurance refund is usually between four and six weeks.
You can get clarification from your insurance provider to know how long it’s going to take to get gap insurance refunds. This would enable you to understand how long you have to wait to get your refund.
