Can You Cancel GAP Insurance and Get a Refund?

Yes, in most cases. You can usually cancel GAP at any time with a written request, including GAP you bought at the dealership. If you cancel within the free-look period (at least 30 days in many states), you typically get a full refund. After that, you usually get back the share of the GAP cost you haven't used yet, minus any cancellation fee your contract allows.

Two exceptions: a few contracts can't be canceled once the free-look period ends, and there's no refund if GAP has already paid a claim on your car.

When it makes sense to cancel GAP

• •You paid off the loan early. GAP only covers a loan balance. With no loan, it covers nothing.
• •You refinanced. The old GAP was tied to the old loan, which the refinance paid off.
• •You sold or traded in the car. The loan ended, so the coverage did too.
• •You owe less than the car is worth. If the car were totaled, your auto insurance payout would already cover the loan.
• •You're paying for GAP twice. For example, GAP from the dealer and GAP from your auto insurer on the same car.

In the first three cases, you're usually owed a refund for the unused coverage whether or not you formally cancel, and in some states it's supposed to arrive automatically. See the rules in your state.

When to keep it

Keep GAP while you still owe more on the loan than the car is worth. That's the situation it exists for: if the car is totaled or stolen, your auto insurance pays what the car is worth, and GAP covers the rest of the loan. To check, compare your loan payoff amount with what the car would sell for today. If you're replacing dealer GAP with cheaper GAP from your insurer, start the new coverage before you cancel the old one.

How to cancel GAP insurance from a dealership

1. 1

   Find your GAP contract

   It's in your car purchase paperwork, often called a GAP waiver, GAP addendum or debt cancellation agreement. If you can't find it, ask the dealer's finance office for a copy. The contract names the company that handles cancellations.

2. 2

   Send a written cancellation request

   Address it to the GAP administrator or insurer named in the contract, not just the salesperson. Some companies require their own form, so check the contract or call and ask.

3. 3

   Include the details they need

   Your name, the vehicle's VIN, the GAP contract number, the date you want coverage to end, and the reason. If your loan has ended, include proof, such as a payoff letter or lien release.

4. 4

   Keep copies and send it in a way you can track

   Email with a saved copy, or mail with tracking. Write down the date you sent it.

5. 5

   Follow up if you hear nothing in 30 days

   A second written request usually gets things moving. If you're ignored after that, your state's insurance or consumer protection office can help.

Want the wording? Use our free cancellation letter template or the step-by-step DIY guide.

How much do you get back?

Most refunds are the unused share of what you paid for GAP. For example, if GAP cost $700 on a 72-month loan and you cancel after 24 months, 48 of the 72 months are unused. That's two thirds, or about $467, before any cancellation fee.

Some contracts use an older formula called the Rule of 78s, which pays back less. See how the two compare.

Cancellation fees, where allowed, are often capped by state law: for example $50 in Alabama and New Jersey, and $75 in Florida and Missouri. California doesn't allow one on GAP it covers.

Where does the refund go?

It depends on whether you still have the loan. If the loan is paid off, the refund should come to you, usually as a check. If the loan is still open, the lender can apply the refund to your balance instead. You still get the value, but as a lower payoff amount rather than a check, so look for it on your next loan statement.

Is there a deadline?

If you're canceling because the loan ended early (payoff, refinance, sale or trade-in), many states give you 90 days from that date to send your written request. Sending it soon keeps you well inside that window.

Frequently asked questions