How to Cancel a Gap Insurance Policy and Get a Refund

Last Updated on December 15, 2025

You may have gap insurance (also called “GAP” or “guaranteed asset protection”) on a financed or leased vehicle. If you no longer need it—or you’re paying for it through the wrong place—you may be able to cancel your coverage and get money back.

In most cases, canceling is straightforward: contact the company that sold you GAP (your auto insurer, dealership, lender, or a third-party GAP administrator), submit any required paperwork, and request a refund of the unused portion of your premium or enrollment fee.

Below is what to know about how GAP works, when it’s safe to cancel, and how refunds typically work.

Key Takeaways

• You can usually cancel GAP after paying off your loan, selling/trading the car, refinancing, or once your vehicle is worth more than what you owe.
• Where you bought GAP matters: insurer-added GAP is often easy to remove, while dealership/lender GAP may require a signed cancellation form and may refund your lender first.
• Most refunds are prorated (“unearned” premium/fees) and may be reduced by an administrative or early termination fee depending on your contract.
• Don’t cancel if your loan or lease requires GAP—canceling could put you in violation unless you replace it with acceptable coverage.

How Gap Insurance Works

Gap insurance helps pay the difference between your car’s value (what your insurer pays after a total loss) and what you still owe on your loan or lease.

If you’re “underwater” on a car loan, you owe more than the vehicle is worth. That’s when GAP can matter most.

Example: You finance a $50,000 truck with a small down payment. A year later, the truck’s actual cash value (ACV) might be $42,000, but your loan payoff could still be $46,000. If the truck is totaled or stolen, your auto insurer generally pays ACV (around $42,000), and GAP may cover some or all of the remaining $4,000 you still owe (depending on your contract).

Important: GAP usually has exclusions. Many contracts won’t cover things like late fees, missed payments, extended warranties, wear-and-tear items, or a big “negative equity” rollover from a previous loan. Always check your GAP paperwork to see what’s covered.

Where to Buy Gap Insurance

You can buy gap insurance from:

• Car insurance companies
• Car dealerships
• Lenders (like banks, credit unions, or auto financing companies)

Sometimes, your car loan or lease payments have gap insurance built in. In that case, it may be listed as a GAP waiver or enrollment fee inside your loan/lease contract instead of a separate “insurance policy.”

Auto insurer GAP vs. dealership/lender GAP

When It Makes Sense to Cancel Gap Insurance

You may be able to cancel GAP when you no longer have a meaningful “gap” to protect.

• You paid off the loan: If there’s no loan, there’s nothing for GAP to pay.
• Your car is worth more than you owe: If you have positive equity, the “gap” is gone.
• You sold or traded the vehicle: GAP usually ends once the loan/lease tied to that car ends.
• You refinanced: You may need to cancel the old GAP and (if needed) buy a new one tied to the new loan.
• You found duplicate coverage: Some policies include similar protection (but limits and rules vary), so compare carefully before paying twice.

Don’t cancel if your loan or lease agreement requires GAP (common with leases and low-down-payment financing). Canceling could put you in violation of your contract.

How to Cancel Gap Insurance

In most cases, it’s easy to cancel gap insurance and—if you’re eligible—receive a refund.

Here’s how to cancel gap insurance and receive a refund:

Step 1) Confirm you’re allowed to cancel. Review your loan/lease paperwork and your GAP contract. If your lender requires GAP, you may need to replace it (not remove it) until the requirement ends.

Step 2) Figure out who actually sold/holds the GAP. If you bought it from your auto insurer, you’ll cancel through your insurance company or agent. If you bought it in the finance office, your GAP contract may be administered by a third-party company—even though the dealership sold it—so check the contract for the administrator’s name and cancellation instructions.

Step 3) Gather your documents. Requirements vary, but these are commonly requested:

• GAP policy/contract number
• VIN and current mileage (odometer disclosure)
• Loan payoff letter or paid-in-full notice (if the loan is paid off)
• Bill of sale, trade-in paperwork, or lease turn-in paperwork (if you sold/traded/returned the vehicle)
• Refinance documents (if you refinanced)

Step 4) Submit a cancellation request. Some companies let you cancel by phone or online. Others require a signed form or written notice. Ask for a confirmation email/letter with the effective cancellation date.

Step 5) Track the refund. If the GAP was rolled into your loan and your loan is still active, the refund is often sent to your lender first (as a credit to your balance). If the loan is paid off, the refund may be mailed to you or deposited back to your payment method—depending on the administrator.

Can I Get a Refund on Gap Insurance?

You generally can’t get a refund on GAP that has already been used for a paid claim. GAP is designed for total losses—once it pays out, the contract’s job is done.

However, you may be able to get a refund if you cancel early and have unused coverage remaining.

For example, if you paid a lump sum for a GAP contract and cancel halfway through the term, you may qualify for a prorated refund of the unused portion (minus any allowed administrative fee). If you paid month-to-month, your refund (if any) is typically smaller because you’ve already been paying as you go.

Other Things to Know About Gap Insurance Refunds

Here are the common “fine print” issues that affect GAP refunds:

Refunds are usually prorated (not all-or-nothing): Many contracts refund the unused portion based on time remaining, but the exact math can vary.

Cancellation fees may apply: Some companies charge an administrative or early termination fee, which reduces the refund amount. (This is one reason to review your contract before canceling.) For more background on how refunds and fees can work, see Experian’s overview of GAP refunds.

Your refund may go to the lender first: If the GAP was financed, the administrator may send the refund to your lender as a principal credit while the loan is still open.

Some companies require written notice: Depending on the contract (and sometimes state rules), you may need to mail or upload a signed cancellation form.

You can’t get a refund after a total loss claim: If you have been involved in a total loss insurance claim and your GAP benefit was paid, you generally won’t receive a refund.

Cancelling GAP could violate your loan or lease agreement: Some lenders require GAP on a new loan or lease. If you cancel, you could violate your loan or lease agreement. Check your paperwork first.

Is Gap Insurance Worth It?

Gap insurance may or may not be worth it. It’s most valuable when you’re likely to be underwater early in the loan.

GAP is often worth considering if:

• You’re financing for a long term (60–84 months)
• You made a small down payment (often under 20%)
• You rolled negative equity from an older loan into the new one
• You bought a vehicle that depreciates quickly
• You are leasing a vehicle
• Your lease or financing agreement requires GAP

FAQs on Canceling GAP Insurance and Getting a Refund

Final Word: Contact Your Insurer, Dealership, or Lender to Cancel Gap Insurance and Get a Refund

To cancel GAP, start with your contract: it tells you who administers the coverage and what documents you’ll need. Then contact the insurer, dealership, lender, or GAP administrator to request cancellation and ask how the refund will be issued.

If you prepaid for GAP you no longer need, you may be entitled to a prorated refund of the unused portion—especially after paying off the loan early, refinancing, or selling/trading the vehicle.