If you pay off or refinance your auto loan early, sell the car, or cancel the coverage, you're usually owed a prorated refund of the unused gap premium. It's rarely automatic — you request it in writing from whoever sold it (the dealer, lender, or insurer), include your payoff or sale date, and ask for the prorated unearned amount.
Gap insurance is priced for the full original length of your loan or lease. When the loan ends early — because you paid it off, refinanced, sold or traded the car, or the car was totaled and the claim closed — the portion of the premium covering time you no longer need is 'unearned,' and you're generally entitled to a prorated refund. The catch: in most cases nobody sends it to you automatically. You have to ask.
Send a written request (email or letter) stating the date the loan was paid off, refinanced, or the car was sold, and ask for a prorated refund of the unearned gap premium. Include your account or loan number and a copy of the payoff confirmation or bill of sale. Keep a dated copy — a written record matters if you have to follow up.
Most refunds are prorated by the number of months remaining on the original term (a 'pro rata' method); some contracts use a front-loaded method that returns less the longer you held the coverage. Your gap contract spells out which method applies. The Consumer Financial Protection Bureau has specifically examined auto lenders' handling of unearned gap fees after early payoff and required refunds in several actions — so a refund after early payoff is a well-established consumer right, not a favor.
Many borrowers never claim a gap refund they're owed simply because they don't know to ask. Request it as soon as the loan is paid off or the car is sold. ClearValue Lending is not a licensed insurance broker or agent; your gap contract and your lender or insurer are the authoritative source for your refund terms.
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