GAP insurance or Guaranteed Asset Protection helps ensure you’re not thousands of pounds out of pocket if your car is stolen or damaged beyond repair and your car insurance provider categorises it as a write-off.
If you’ve taken out a personal loan, lease or PCP agreement for a new vehicle, or you’ve bought a vehicle outright, it’s worth having the protection of GAP coverage while the amount you owe is more than the value of your car. The value of new cars depreciates very steeply in the first year from new – cars lose up to 40% of their value over the first 36 months of ownership. GAP insurance coverage can be incredibly helpful in avoiding a significant shortfall.
While GAP insurance is very beneficial for a wide range of car owners, a change in your circumstances can mean you no longer need coverage. You may want to cancel before your GAP policy term is over. This article explains exactly how to cancel GAP insurance, your refund entitlements and other considerations.
Click on one of the sections below to learn more:
Common reasons for cancelling GAP insurance
There are many reasons you may want to cancel. However, many who use GAP insurance to cover vehicle finance (when you owe more than the market value) may want to cancel once they’re no longer in negative equity. It’s also a common misconception that you have to cancel your GAP insurance if you’ve paid off the outstanding loan to your finance company or that your GAP policy doesn’t benefit you after you’ve paid off your car. Another common reason to cancel your insurance policy is selling or trading your vehicle.
GAP insurance tops up your comprehensive motor insurance settlement after a write-off whether you used a finance agreement or paid in cash. The only difference with covering your vehicle finance is that we’ll pay up to your outstanding loan balance (at the time of the claim) if this is higher than the car’s original total value (Back to Invoice GAP insurance) or replacement cost (Vehicle Replacement GAP insurance).
Once you pay off your finance balance (or at least, owe less than the original vehicle price or replacement cost) for your car, total loss GAP policy works the same way for financed and cash-bought cars – we pay up to the original vehicle (BTI) value or replacement cost (VR).
Only 17% can afford a like-for-like replacement after a total loss with their car insurance settlement. GAP insurance helps you afford a replacement vehicle after a total loss even if you’ve paid off your car finance.
You don’t always have to cancel GAP insurance if you sell or trade your insured vehicle. It may be preferable to transfer GAP insurance. You will have to take out a new policy but we can calculate the unused premium and add this as credit to the new policy – don’t worry, we never charge admin fees. Nevertheless, you’re entitled to cancel for any reason and at any time as long as no GAP claim is pending on your policy.
You have 30 days from your policy start date to cancel your GAP insurance cover and receive a refund for the full amount. If you’ve passed the cooling-off period, you can still cancel but you’ll only receive a pro-rata refund based on your unused annual premium. We never charge cancellation fees.
Cancellation works slightly differently if you pay monthly for your GAP insurance policy. Once you contact us for a cancellation request, no further payment will be due. Your GAP coverage will cease from the end of the period of insurance your last payment relates to.
Contact us directly to cancel your GAP insurance policy.
It’s worth mentioning that, if you fail to pay your GAP insurance premium when it’s due, your policy will be cancelled from the end of the last month you paid for. No further payment will be due but there will also be no GAP insurance cover in place. I we notice that you’ve missed a payment, we will attempt to contact you in every way we can before issuing a 14-day notice of cancellation.
With ALA, you’ll always be entitled to a refund after cancelling GAP insurance. During the 30-day cooling-off period, you’ll get a full refund of your policy cost, with no admin fees. If you’re passed the cooling-off period, you’ll get a pro-rata refund proportionate to any unused premium. If you pay monthly, you will not be charged any further payments after you cancel your GAP cover.
Please consider that you won’t be able to cancel your GAP insurance policy if you have a pending claim or if you have made a successful claim on your policy. Once you make a successful GAP insurance claim, your coverage ends and you’ll need a new policy on your next car.
ALA provide a range of GAP insurance policies to suit different needs. Whether you have a new car or a second-hand one, paid on finance, lease agreement or with cash, you can find the best GAP insurance policy for you. We even have a policy for vehicles bought from private sellers—see our Agreed Value GAP insurance if your car wasn’t purchased at a VAT-registered dealer. Explore the other benefits of ALA GAP insurance:
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All our products are insured and regulated by the Financial Conduct Authority – all polices are protected by the Financial Services Compensation Scheme.
Yes, you can cancel your policy at any point and for any reason from the day you bought it right up until the day your policy term ends. Consider that once you’re outside of the cooling-off period, you’ll receive a pro-rata refund of your unused premium.
We put our customers at the centre of everything we do and aim to process refunds as quickly as possible. After contacting us to cancel your policy, you should receive a refund back to the original payment card or within 7-10 days via bank transfer.
There is no fee if you cancel your GAP insurance policy. However, if you cancel or transfer your policy after the cooling off period, you’ll receive a pro-rata refund of any unused premium.
Cancelling your GAP insurance policy won’t impact your car finance or leasing company. However, once you no longer have cover in place, you risk a financial shortfall if the worst happens and you write off your car. Consider Contract Hire GAP insurance, Vehicle Replacement Plus or Back to Invoice GAP insurance to cover dealer-bought cars.
Cancelling GAP insurance isn’t the only option for when you sell your car or it changes owners. Unlike other providers, we offer free policy transfers and amendments which allows you to use your unused premium towards your next car.
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