Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life, from budgets to coverage levels. Through her years working in th...

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Reviewed by Melanie Musson
Published Insurance Expert Melanie Musson

UPDATED: Mar 16, 2022

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Just What's Essential

  • GAP insurance covers the difference between what you owe on your vehicle and what it’s worth
  • Most lenders require GAP insurance in addition to full coverage car insurance
  • You can cancel GAP insurance once you owe less than your car’s worth

If you lease or finance a car, you’ll probably have to carry GAP insurance. GAP, or Guaranteed Asset Protection, pays the difference between what your vehicle is worth and what you owe if it’s totaled or stolen.

However, with a financed vehicle, at some point, you won’t need GAP coverage any longer. So knowing when and how to cancel GAP insurance saves you money.

Keep in mind that most lenders require full-coverage car insurance in addition to GAP coverage. Adding more coverage better protects their investment.

Keep reading to learn how to cancel GAP insurance and when you don’t need the extra coverage.

What is GAP car insurance?

Buying or leasing a new car is exciting. However, a lot of extra costs come along with that new car. Unfortunately, GAP insurance is something most new car buyers don’t consider when adding up costs.

How does GAP car insurance work?

Cars depreciate about 20% in their first year. As a result, you typically owe more than the car is worth as soon as you drive it off the lot. GAP insurance covers that difference for a total loss.

For example, let’s say you bought a car for $50,000, and it’s now worth $40,000. GAP coverage pays that $10,000 difference if the vehicle is stolen or totaled.

The dealer will offer car insurance, including GAP coverage, when you buy or lease a car. However, you don’t have to get car insurance through your dealer. It’s much more expensive than if you look for coverage on your own.

How long does GAP insurance last?

GAP insurance isn’t costly, and you don’t have to carry it forever. In addition, because your state does not require it, you can cancel it as soon as you owe less than your car is worth.

Additionally, you won’t be required to carry GAP insurance if you paid cash for your vehicle or put down a substantial down payment.

Keep in mind that GAP insurance only pays for a complete loss of your vehicle. GAP insurance does not cover repairs, parts, missed payments, and wear and tear.

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How do you cancel GAP insurance?

Canceling GAP insurance is pretty easy. Simply contact your car insurance company and remove the coverage. You may even be able to handle it yourself online or through the company’s app.

However, if you have insurance through your dealer or lender, you will have to call them to find out how to cancel GAP insurance.

You may have to submit a cancellation form, mileage documentation, and other forms. Your car insurance company or dealer can provide you with cancellation requirements.

If you’ve paid in advance for GAP coverage, you should get a prorated refund. However, if your insurance has paid a claim for a stolen or totaled vehicle, you won’t receive a refund for the GAP coverage.

Remember, if you have a lease or contract through a lender, it will probably determine exactly when you can cancel GAP coverage. Removing mandatory coverage costs you time and money.

For example, your lender can purchase car insurance for you if you don’t carry the necessary coverages. According to the Consumer Financial Protection Bureau, the lender can require force-placed insurance, which is much more expensive than the coverage you can find yourself.

Do you have to have full coverage with GAP insurance?

GAP insurance through a dealer costs around $500 a year. However, GAP coverage through a car insurance company costs a fraction of that.

Your lender and the car insurance company will probably require full coverage car insurance in addition to GAP coverage. Full coverage combines liability, collision, and comprehensive coverages. So, not only are property damages and bodily injuries to others covered, but your vehicle is covered as well.

While full coverage offers more protection, rates are also higher. This table shows average annual car insurance rates based on coverage types from top companies.

Average Annual Car Insurance Rates Based on Coverage Type
CompanyAverage Annual Rate for Low CoverageAverage Annual Rate for Medium CoverageAverage Annual Rate for High Coverage
Allstate$4,628.03$4,896.81$5,139.02
American Family$3,368.49$3,544.37$3,416.40
Farmers$3,922.47$4,166.22$4,494.13
GEICO$3,001.91$3,213.97$3,429.14
Liberty Mutual$5,805.75$6,058.57$6,356.04
Nationwide$3,394.83$3,449.80$3,505.37
Progressive$3,737.13$4,018.46$4,350.96
State Farm$3,055.40$3,269.80$3,454.80
Travelers$4,223.63$4,462.02$4,619.07
USAA$2,404.11$2,539.87$2,667.92
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Rates only increase around $30 a month to add collision and comprehensive coverages. In addition, GAP coverage costs about 5% of collision and comprehensive rates. So while GAP coverage doesn’t raise car insurance rates very much, full coverage does.

How can you save on full-coverage car insurance?

Because full coverage offers more protection, rates also increase. The good news is that there are ways to lower those increased rates.

First, take advantage of car insurance discounts. Insurance companies offer a variety of discounts based on the driver, policy, and vehicle. You can bundle savings such as multi-car and safe-driver discounts. You can even get discounts based on your car’s safety features.

This table shows car insurance discounts from top companies. The savings amount is listed if it is available.

Car Insurance Discounts
Car Insurance DiscountsAllstate (%)American Family (%)Farmers (%)GEICO (%)Liberty Mutual (%)Nationwide (%)Progressive (%)State Farm (%)Travelers (%)USAA (%)
Adaptive Cruise ControlN/AN/AN/AN/A5xxN/AN/AN/A
Adaptive HeadlightsN/AN/AxN/A5xxN/AN/AN/A
Anti-lock Brakesxxx555x5xx
Anti-Theftxxx252025x15xx
Claim Freexxx26x10x152312
Continuous CoveragexxxxN/AN/AxN/A15N/A
Daytime Running Lightsxxx155xN/Axx
Defensive Driverxxxx105105103
Distant StudentxxxxN/A10xx7x
Driver's Edxxxx10N/A101583
Driving Device/AppxxN/Ax30402050305
Early SigningxxxxN/A8xN/A1012
Electronic Stability ControlxxxN/A5xxN/AN/AN/A
Emergency DeploymentN/AN/AN/A25N/AN/AN/AN/AN/AN/A
Engaged CoupleN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A
Family LegacyN/AxN/AxN/AN/AxN/AN/A10
Family PlanN/AxxN/AN/A25N/AN/AN/AN/A
Farm VehiclexN/AxxN/AN/AN/AN/AN/AN/A
Fast 5N/AN/AN/AN/AN/AN/AN/AN/AN/AN/A
Federal EmployeeN/AN/Ax810N/AN/AN/AN/AN/A
Forward Collision WarningN/AN/AN/AN/A5xxN/AN/AN/A
Full PaymentN/Axxx$5N/AxN/A7.5N/A
Further EducationN/AN/AN/Ax1015N/AN/AxN/A
Garaging/StoringN/AN/AxN/AN/AN/AN/AN/Ax90
Good CreditxxN/AN/AN/AxxxN/AN/A
Good Studentxxx1522.510x2583
Green VehiclexN/A5N/A10N/AN/AN/A10N/A
HomeownerN/AN/Axxx5x35N/A
Lane Departure WarningN/AN/AN/AN/AxxxN/AN/AN/A
Life InsurancexN/AN/AN/AN/AxN/AN/AN/AN/A
Low Mileagexxxxxxx30xx
LoyaltyN/AxN/AxN/A5xN/AN/Ax
MarriedN/AN/AN/AN/AxxxxN/Ax
Membership/GroupN/AN/AN/Ax107N/AN/AxN/A
MilitaryxN/Ax154N/AN/AxN/Ax
Military GaragingN/AN/AN/AN/AN/AN/AN/AN/AN/A15
Multiple DriversN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A
Multiple Policies1029x102010121713x
Multiple Vehiclesxxx25102010208x
New AddressN/AN/AN/AN/A5N/AN/AN/AN/AN/A
New Customer/New PlanN/AN/AN/AN/AxN/AN/AN/AN/AN/A
New GraduateN/AN/AN/AN/A5N/AN/AN/AN/AN/A
Newer VehiclexN/AxxN/Axx401012
Newly LicensedN/AN/AN/AN/A5N/AN/AN/AN/AN/A
NewlywedsN/AN/AN/AN/A5N/AN/AN/AN/AN/A
Non-Smoker/Non-DrinkerN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A
Occasional OperatorN/AN/AN/AN/AN/AN/AN/AN/AN/Ax
OccupationxN/Axx1015N/AN/AxN/A
On-Time PaymentsxN/AN/AN/AN/AN/AN/AN/A15N/A
Online ShopperN/AN/AN/AN/AN/AN/A7N/AN/AN/A
Paperless DocumentsxxxN/AN/A5$50N/AN/AN/A
Paperless/Auto BillingxxxN/Ax$30x$233
Passive Restraintxxx40x20x40xx
Recent RetireesN/AN/AN/AN/A4N/AN/AN/AN/AN/A
RenterN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A
Roadside AssistanceN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A
Safe DriverN/AN/Ax15N/A3531152312
Seat Belt UseN/AN/AN/A15N/AN/AN/AN/AN/AN/A
Senior DriverxN/AxN/AN/AN/AN/AN/AN/Ax
Stable ResidenceN/AN/AN/AN/AN/AxxN/AN/AN/A
Students & AlumniN/AxN/Ax107N/AN/AN/AN/A
Switching ProviderN/AxxN/A10N/AxN/AN/AN/A
Utility VehiclexN/AxxN/AN/AN/AN/AN/AN/A
Vehicle Recoveryxxx153525x5xx
VIN EtchingN/AN/AxN/A5xxN/Axx
VolunteerN/AxN/AN/AN/AN/AN/AN/AN/AN/A
Young DriverN/AN/AN/AN/AxN/AxN/AN/A$75
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Next, raise your deductibles. Your deductible is how much you must pay before your car insurance kicks in. Although raised deductibles increase your out-of-pocket costs, they also keep your overall rates low.

Finally, shop around for coverage. Every insurance company weighs your factors differently. Compare multiple companies to find full coverage and GAP insurance with the lowest rates available to you.

Enter your ZIP code below to view companies that have cheap auto insurance rates.

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How To Cancel GAP Insurance: The Bottom Line

GAP insurance is necessary if you owe more than your vehicle is worth. Although GAP coverage is not required by law, most lenders require it in addition to full coverage car insurance to protect their investment.

While canceling GAP insurance is relatively simple, your lender may require you to keep the coverage. If you cancel anyway, your dealer or lender can purchase much more expensive coverage on your behalf.

Add discounts and raise deductibles to save money on car insurance with GAP coverage. In addition, find lower rates by shopping around for coverage.

Now that you know how to cancel GAP insurance check with your lender before you drop the coverage.