Guaranteed Auto Protection is a valuable debt-cancellation tool although often referred to as insurance. Its purpose is to pay the difference between actual cash value of the car and outstanding loan on it in case the insurer totals it after it is damaged by a listed peril. It can be a valuable protection especially in the early years of buying a costly automobile with finance. However, there are a few good reasons for finishing with it and asking for premium refund.
Why Would GAP Auto Insurance Be Cancelled?
When you purchase a brand new vehicle its value gets depreciated pretty fast. General belief is that an automobile loses at least ten percent of its value the moment it has left the salesroom. If you have already paid for it outright you are probably less bothered. But not many people are lucky and most have to arrange finance for it. Then, their loan pretty quickly can go upside down and they owe more money than the Actual Cash Value (ACV) of the vehicle.
ACV is important because the company would only pay you the fair market value of the auto at the time they total it. So, as long as the debt is upside down you’d better keep the protection in place. Otherwise, you won’t be able to pay it off with the money from a claim settlement and still owe for a vehicle you don’t have.
However, you wouldn’t need this loan-lease payoff coverage in the following circumstances and can terminate. It may actually become void anyway.
- If you paid off the debt you don’t need it anymore since you don’t have anything to be protected for.
- Even if you still have, it may be down substantially that what you owe is much less than the car’s actual cash value. Then, you probably don’t need to keep it and the lender may agree to release you of this requirement.
- It isn’t transferrable from one automobile to another. So, if you trade in the auto it is voided. That is why you will need to buy another policy if you still have finance.
- It isn’t transferrable from one loan to another either. So, if you refinance it you will need to stop the previous and buy another one for the new borrowing, if you still need to.
- Quite often dealers or lenders charge extortionate rates for this. As soon as people realize that they are getting more than 50% commission on a gap car insurance policy they want to cancel it and buy from somewhere else. They may also want some of their money back if they have paid in full already.
The reason people end up purchasing it from dealers is that they probably hear about it for the first time and they don’t know better. The salesman won’t certainly tell them that it is much cheaper from somewhere else because they will lose their commission. You can get this coverage for as little as $20 per annum from most carriers. So, don’t let anyone con you into signing a terrible deal.
How Does Gap Insurance Rebate Work?
Most people don’t realize they can get proportion of the premium back based on how much of it is used for time on risk, after trading in cars, refinancing debt or canceling the coverage. If you were paying a very competitive price it may not be as much of a problem. However, people can pay as much as $400 – $700 for it. That is a serious amount to leave behind.
Some people may not even realize that they have already paid for Gap protection when they bought a vehicle. Dealers or lenders may have quickly touched on it and added the costs onto the borrowing. So, you should check the documents when you sell or trade in a vehicle, pay or refinance it. You may be due some money back.
There are a few providers of this cover and each may administer it differently. You can buy it from dealers, lenders, credit unions and most insurers. However, most providers do a prorated refund of unused portion of the premium.
With some providers, all you may need is to call them and let them know when you need the policy terminated from. With others you may need to provide some documents confirming the disposal of the vehicle or payment of the loan. Usually, you can send scanned copy of these documents by e-mail.
How Much Gap Vehicle Insurance Refund to Expect
This mostly depends on how you have been paying the premium. There are cases in which full five years worth of it are collected as part of the vehicle purchase process. Then, you can expect several hundred dollars depending on how long left in the loan or lease contract.
You will only get rebate if you paid the premium in advance. If you are paying it monthly with loan payments you may not get anything back since it is already used for time on risk.
Some policies may come with 30-days cancellation clause with some providers. If that is the case and this period isn’t over yet you may be able to get full refund.
You can actually get it for as little as $20 per annum. If that is the case, you don’t need to eagerly wait for a check. Unfortunately, car salesmen are known to rip off customers by charging large sums for this and keep half the money as commission. Then, you need to make sure you get it back.
Usually, you should know or find out who is the provider. Then, you can ask your money back from them but people report getting a check from dealers. So, you should check the documents and find out who has pocketed it. They are the ones who should send it back.
How Long Does It Take to Get Gap Insurance Refund?
Normally it shouldn’t take more than couple of weeks with most companies. But some companies may make it harder to complete the paperwork. Still, as long as you send what they want there is no reason for them to delay. Just check the process, send it the required documents and follow up if you don’t receive it back with in few days.