Do I get my GAP insurance money back after I pay off my car?

Generally, you will not get GAP insurance money back after you pay off your car. Even if you never make a claim on your GAP insurance, you are unlikely to get a GAP insurance refund, though depending on your policy contract, it may be possible.

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Karen Condor is an insurance and finance writer who has degrees in both journalism and communications. She began her career as a reporter covering local and state affairs. Her extensive experience includes management positions in newspapers, magazines, newsletters, and online marketing content. She has utilized her researching, writing, and communications talents in the areas of human resources...

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Written by Karen Condor
Insurance and Finance Writer Karen Condor

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Apr 25, 2022

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GAP auto insurance is designed to cover the gap between the actual cash value of your vehicle and the price you paid for that vehicle. Once your car is paid off, however, you no longer need GAP insurance. Do you get GAP insurance back after you pay off your car? Today, we’re explaining everything you need to know about a GAP refund for a car insurance policy and hopefully help increase your understanding of auto coverage regulations.

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What is a GAP insurance policy?

GAP auto insurance covers the “gap” between what you owe on a car and what that car is currently worth. An ordinary car policy is designed to cover the actual cash value of the vehicle, which is the exact value of that vehicle at the time of an accident or another insured event. Related: What is the actual cash value of my car?

However, depreciation can be steep on a new car. You might have paid $60,000 for a brand new truck, only to have that truck be worth $50,000 the moment you drive it off the lot.

That’s where you need a GAP car insurance policy. If you get into an accident with your new vehicle, then your insurance provider might pay you less than what you owe on the vehicle. You might receive a $50,000 payout, for example, despite the fact that you paid $60,000 for your car.

Depending on who you ask, this type of insurance can refer to the “gap” between the value of your car and the amount you actually paid for it. Or, it can refer to “Guaranteed Auto Protection” (GAP). Both gap and GAP, however, are two terms for the same policy.

But is GAP insurance refundable? Let’s break it down.

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Why do I need GAP coverage?

GAP coverage is often included in your car payments or lease payments. A car dealership or financing company will include GAP coverage in your monthly payments to ensure you can pay back the auto loan in any situation, for example.

Some drivers may also buy their own GAP coverage after leasing or financing a vehicle. Most car insurers offer GAP as a standalone policy.

In most cases, however, GAP coverage is built into your leasing or financing agreement. Once you have finished making car payments, you no longer need GAP.

Can I get a GAP insurance refund?

So, is GAP insurance refundable? For GAP coverage that was not used, you can get a partial GAP refund (if the vehicle was paid off early). Premiums are calculated on both the value of your car and the loan’s term. Your insurance company has to refund you for the unused premiums that were paid on your policy.

To acquire a refund, review your policy’s terms and conditions. By doing this, you can verify your eligibility to get a refund. It may be possible to get a refund if the contract ended shortly after getting your policy (30 days or less).

How do GAP insurance refunds work?

Most drivers will never need to make a claim on their GAP coverage. If you get into a serious accident while leasing or financing your vehicle, then you may need to use your GAP policy. In most cases, however, your policy will remain untouched.

Once you have reached the end of your lease or financing agreement, your GAP insurance payments may be completed. At this point, some drivers wonder if they can get a refund on unclaimed GAP payments.

Generally, you will not receive any type of refund on your GAP policy – just like you don’t receive a refund on other policies that go unclaimed. Some drivers will pay for coverage their whole lives without making a GAP insurance claim. That’s just how coverage works.

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What happens to GAP coverage when you pay off your car?

The only time you may receive a refund is if you pay off your vehicle early, in which case you no longer need GAP insurance coverage. If you pay off your vehicle loan early, then you may be entitled to a refund for GAP insurance that you prepaid. Contact your financing company or GAP insurance provider with proof that you have paid off your vehicle. There is no specific GAP insurance refund phone number. Simply call your financing company and they will help you.

In most cases, however, leasing and financing agreements provide no incentive for paying off a vehicle early. The interest payments and GAP insurance premiums are built into your monthly payment. In some cases, you may receive a small refund when paying your vehicle in full early. In other cases, however, you will receive no refund whatsoever. This is just part of the cost of leasing or financing a vehicle.

Can I cancel GAP insurance if my car is paid off?

Can GAP insurance be canceled? If you paid off your vehicle early, then you may be able to cancel your GAP insurance coverage separately to obtain a refund.

Check your leasing or financing agreement to determine how your GAP coverage works. Then, contact your GAP insurer with a request to cancel your GAP policy.

You may need to provide various documentation and paperwork before canceling GAP insurance coverage, including proof of payment of all auto loans, a copy of your odometer reading, and other cancellation forms.

This type of coverage is typically charged on a monthly basis. If you cancel early in the month, then you may receive a refund on any unused premiums from the rest of the month. You will also not need to pay any future monthly premiums or payments after you cancel.

How can I cancel GAP coverage?

You can cancel by first reviewing your GAP insurance contract to locate the contact information for the person or office you should call. If you are unable to find the contract, then get in touch with the dealership where you purchased your car (if applicable).

Before you complete the cancellation form, consider your current circumstances. Your policy offers protection if, after an accident, the repair cost is more than the vehicle. When completing the cancellation form, complete everything in full and sign, explaining that you want to cancel your GAP coverage.

If you’ve paid for GAP insurance from a dealership and then you decide to purchase a GAP policy from your auto insurance company, you may be able to get a GAP insurance refund from the dealership if you supply them with proof of your coverage.

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What’s our conclusion?

GAP coverage is often part of the cost of leasing or financing a vehicle. After your vehicle’s lease or loan is paid off, you no longer need it. However, you are unlikely to receive a refund.

You may receive a small refund if you have paid off your car loan, then call the insurer to cancel the GAP portion of your policy. If you paid your gap policy early in the month, for example, then you might receive a refund on the premiums you have already paid. In most cases, however, you are not entitled to a GAP refund of any previous payments.

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