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How does GAP (Guaranteed Asset Protection) insurance work if I refinance my loan?
I'm planning on refinancing my loan, but I currently have GAP insurance. How would GAP insurance work if I refinance?
Emily Maracle · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
GAP insurance won’t carry over from one car to another car and typically won’t carry over when you refinance your car loan. Because of this, you’ll want to reassess if GAP insurance is appropriate for you when you refinance your car loan.
You should consider GAP insurance if you would be at risk of paying back your loan in the event the car were to be totaled or stolen. GAP insurance typically covers the amount that you would have to pay back to your lender, minus your deductible and payments from your insurance company for a claim.
If you want peace of mind knowing your loan will be covered if you’re in an accident or your car is stolen, you should purchase GAP. Depending on your refinancing terms, you may still need GAP insurance after refinancing your loan. Typically, when you select a lender to refinance with, they’ll give you the opportunity to purchase GAP coverage.
As noted above, GAP coverage stands for Guaranteed Asset Protection. GAP coverage kicks in when the amount you owe on your loan exceeds the
actual cash value
of your vehicle. Depending on your initial loan terms, you may still owe more on your loan than your vehicle is worth, even after refinancing. GAP coverage helps ensure you won’t have to pay out-of-pocket for the remainder of your loan after an insurance payout.That said, if you do pay off your loan or refinance with a different lender, you will need to cancel your GAP insurance with your current lender if it isn’t done automatically as part of your payoff or refinancing process. You can reach out to your current GAP provider to see what your cancellation options are and if you’re eligible for a refund.
If you’re interested in refinancing your loan and maintaining GAP coverage, consider using the
Jerry
app. On average, customers can reduce their monthly payment by $118. In addition to refinancing, Jerry’s GAP coverage could save you thousands of dollars after an accident. Jerry may even be able to help you cancel your current GAP insurance if you refinance.View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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