Can I cancel gap insurance from a dealership?

As soon as you drive your new vehicle off the lot, it’s going to depreciate. In the first year alone, your new car can lose as much as 20 to 30 percent of its overall value.

Unfortunately, your car loan may not decrease at the same rate. This is why gap insurance exits. Some lenders do not require gap lease or loan coverage.

But if your loan amount is high compared to your car’s value, many lenders will require gap. But the good news is, you can choose where to buy your gap coverage — you don’t have to get it from the dealership.

Shop around and compare rates before you commit. And if you've already bought coverage from your dealer, you may be able to request a gap insurance refund from that dealership. But be sure you have an active policy in place before you pull the plug on your dealer’s policy. Let’s walk through what you need to know about gap lease or loan coverage and how to make the most of it.

Is gap insurance from a dealer mandatory?

When you're buying a car, the salesperson often presents additional add-ons for extra costs, but you don't have to purchase them.

Dealerships will offer you everything from rustproof undercoating to extended warranties. If you’re uncertain whether you're receiving a good deal, it may be beneficial to reconsider your options.

After you purchase your vehicle, you usually have a window of time to add gap coverage. Be sure to check with your agent so you know about any time limits or requirements.

You have options before you buy gap lease or loan coverage:

Carefully review the dealer’s gap coverage terms and conditions

Don’t assume that the policy they’re offering you does as much to protect you as other policies. Review this policy carefully so you can discuss it with your agent.

Learn about coverage limits

Review the details on your gap lease or loan offer. Determine what percentage of the actual cash value (ACV) the policy pays out. Generally, gap insurance covers the difference between the ACV of the vehicle and the remaining loan balance. However, some policies may cap the payout at a certain percentage above ACV (such as 125%).

Ask the dealer if you can remove gap insurance from a car loan

Sometimes, dealers include the cost of gap insurance in your financing. This fee may be difficult to identify unless you request a quote that excludes gap insurance.

Get a gap lease or loan quote from American Family Insurance

With stiff competition to keep MSRP rates low, dealers are frequently turning to alternative ways to pad their profits. Let them know that you need a few moments to call your American Family agent and get a quote on a gap policy.

Can you remove gap insurance from a car loan?

If you’ve already purchased a policy through your dealer, it’s not too late. You may remove a gap policy, but ensure you maintain coverage during the transition.

Do you get a refund when you cancel your gap insurance from your policy? You actually may qualify for a refund, depending on the terms of the contract.

If you bought your car a few months ago, you may qualify for a refund. The provider will prorate your refund based on how long the policy was active. Most dealerships require you to pay the premium for gap lease or loan protection at closing, which will cover several years.

How long does it take to get a gap insurance refund?

Navigating a refund from your dealership for gap insurance can take some time. You’ll need to contact the insurance company that the dealership works with. And you’ll probably need to have a replacement gap lease or loan policy up and running before canceling.

You may have to wait anywhere from a few days to several weeks to get your gap insurance refund. Timelines vary by provider and state. Here’s what it takes to cancel a dealership’s gap coverage:

Locate your vehicle purchase agreement from the dealer

Be sure that you’ve got copies of the paperwork you signed when you bought your car. If you're unable to locate these documents, you may request duplicate copies from the dealership. They may be able to email you copies and that can save time.

Contact the dealer’s gap lease or loan insurance provider

Reach out to the group you’re currently insured under and ask them what steps are required to cancel your gap policy. They may require you to provide written notice of your intent to cancel. You may be able to scan and email or fax your request.

Provide your current contact information

Be sure to provide your updated address to the dealership’s insurance company.

Purchase alternate gap lease or loan coverage now

Contact your American Family agent and purchase coverage so it’s active prior to cancelling your current policy. Make sure your new coverage starts before you cancel your old policy, so you don’t have a gap in protection.

Sign and return all required paperwork promptly

Get all documents signed and returned as they’re received to expedite the process.

Another benefit of buying gap insurance from American Family is flexible payment options. You can choose a payment method that works best for you.

If you cancel your dealership’s gap insurance, you will usually get a refund. You usually get the refund, but your lender may receive it if your loan agreement says so.

You can use this refund however you want. For example, you might use it to help pay for your new gap insurance or to manage your monthly payments.

Reach out to your American Family Insurance agent and get a quote for your gap insurance needs. Get peace of mind with a policy from a provider you know and trust.

This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.