When Should I Cancel My Gap Insurance?

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Gap insurance is a great coverage which provides protection for when you owe more than what your vehicle is worth. Hopefully, there will come a point when you no longer need gap insurance coverage. Knowing when that time is can save you a lot of money. Cancel gap too early and you could lose out on the valuable coverage. Cancel it too late and you are paying for an insurance coverage you really do not need.

Check out these helpful questions to help you determine when you should cancel gap insurance.

How Much You Owe VS. How Much Your Vehicle Is Worth 

How much do you owe on your vehicle?

Knowing what you owe on your vehicle is the foundation of understanding gap insurance. If what you owe exceeds the retail value of your vehicle gap insurance covers the difference. Review your payment information and find out how much you owe on your vehicle.

Did you finance extras along with your vehicle?

If you wrapped up a previous vehicle's debt or loan with your current auto loan, gap insurance does not cover the prior debt. Same goes for warranties which are rolled into the loan. Gap insurance only covers the cost of the vehicle. Keep these factors in mind when determining how much you actually owe for the vehicle itself.

How much is your vehicle worth?

Now it is time to compare what you owe with what your vehicle is worth.

Each insurance carrier has its own way of computing what the value of a vehicle is. They do not use Kelly Blue Book to determine a value, however, it is a free resource you can use to give you a ball park figure.

Input your vehicle's information as accurately as possible. Then select private party value to give you the most accurate rating.

Do not take the number given as a concrete number in which you will receive in a total loss situation. Like mentioned earlier, it is just a ball park figure.

Removing Gap Insurance

When comparing your vehicle's worth against what you owe, you are looking to owe a decent amount less. Owing one to two thousand less than what Kelly Blue book states the value to be should be enough cushion to give you the go ahead to remove gap insurance. Typically once your meet this threshold the difference between what you owe and what the vehicle is worth continues to grow steadily. It is not impossible to still come up short in a total loss, but the difference ought to be manageable.

Many insurance carriers automatically drop gap insurance once a vehicle is two to three years old. Keep an eye on your specific circumstances such as amount owed and vehicle's worth to make sure that is the best option for you.

The Cost of Gap Insurance

Gap insurance is a very affordable coverage. Many times it is only a couple of dollars a month. The likelihood of using the coverage is not all that great which in return makes it inexpensive. It is better to keep the coverage if you think you could owe more than the vehicle is worth.

Or, ask your insurance agent to help you determine if you still need the coverage. Contact the company in which you have purchased gap coverage to request removal if you believe it is no longer necessary.

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