As every driver has probably already experienced, owning a car entails far more responsibilities than simply knowing how to drive and keeping the vehicle in good shape. Navigating the complex world of car insurance is definitely one of them.
You see, most car owners are not always certain about do they need some form of plan or not. When they sign the contract, they are often not clear about the agreement and don’t know can they get a refund for the unused insurance or not.
That brings us to GAP insurance, one of the least understood insurance plans in the automotive world. Let’s see what we can do about it.
What is GAP insurance?
So, to understand can you get a refund on this type of insurance we will first need to take some time to see what GAP is all about.
The very term GAP stands for Guaranteed Asset Protection and refers to the type of add-on insurance coverage that aims to bridge the gap between the principal balance on your loan and the actual value of your newly purchased vehicle in the case of total loss.
For a number of different reasons, cars tend to lose their value very rapidly. For instance, a new car typically loses 20% of its purchase value in its first year of life. Therefore, in most cases, collision and comprehensive coverage won’t be able to provide all the protection you need for your new purchase.
Is GAP insurance required?
Although the legal requirements are not clearly defined in this regard, leasing companies will often require that you carry the GAP insurance to get the loan agreement. Sometimes, you will find it included in the lease agreement free of charge, if not, you can buy it as an add-on. In the case when the insurance is made a part of the lease agreement, the premiums will be rolled into the loan adding to its overall cost.
Because of these shady practices, GAP insurance can sometimes be considered junk insurance giving you a good base for filing for a GAP insurance refund. Keeping this in mind, using the GAP insurance is more than recommended especially if you are still an inexperienced driver and you are making your first purchase.
Can you cancel the GAP insurance and when?
So, once you purchase the GAP insurance are you obliged to keep the agreement in force can you cancel it and when? Let’s go one by one. Much like any other insurance agreement, GAP insurance can be canceled whenever you feel you don’t need it anymore. However, the cancelation terms, eventual cancelation fees, and possibilities of refund will change depending on the time you decide to make a break. In most cases, you will be offered a 30-day full refund option but this can vary depending on the insurance company.
In which cases you can get a GAP refund?
Now, that we’ve moved all these important considerations off the table, let us quickly go through some of the situations when you are in a position to claim a GAP refund. We have already briefly mentioned the situation when the insurance is made a part of the lease without your consent. Such practices are not considered fair customer treatment.
Furthermore, GAP insurance coverage is determined both on the car value and the length of the loan term. If you manage to pay off the loan early you have the right to get the prorated refund on the rest of the agreed GAP coverage. The same can be said about the instances when you sell the vehicle before the end of the lease term. In that case, the insurance terms no longer apply.
If you experience a total loss and make a claim during the agreement period, you are no longer eligible for a refund.
We hope this short discussion helped you better understand the GAP insurance and the situations when you are eligible for a refund. Like insurance policies, this one has its merits and practical value but only as you are aware of that and the agreement doesn’t go against your financial interests. In any case, you don’t have any use of it after the lease term is over.