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How Long Does Gap Insurance Last?

If GAP Insurance is through an auto insurance company, it lasts as long as the coverage is included in the auto insurance policy. GAP Insurance lasts for the life of the loan if provided through the lender. GAP Coverage is no longer needed when the loan is less than the actual cash value of the car.

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Questioning how long your GAP coverage will last? Perhaps you want to know if you can cancel or refund your GAP Coverage. Keep reading, and we’ll answer all of your questions about GAP Insurance!

By the end of the article, you’ll know the basics of GAP Insurance Coverage, plus a couple of pro tips to save you money and headache!

How Long Does GAP Insurance Last?

When GAP Insurance is purchased through the lender, the terms usually cover the life of the loan. When the coverage is purchased through an auto insurance company, GAP Insurance lasts for as long as it is included in the policy.

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How Do You Get a Refund on GAP Insurance?

If GAP Insurance is a part of an auto insurance policy, contact the insurance company to cancel the policy. You will be refunded based on the amount of coverage you have already paid but will not use. 

EXAMPLE: A policy lasts six months and is paid in full at the beginning. Two months later, the customer removes GAP Coverage from the policy. The policyholder will be refunded for four months. 

The auto insurance policyholder will not be refunded for the two months GAP Insurance coverage was provided, even if the policyholder didn’t file a claim.

For GAP Insurance provided through a lender, find out how to cancel coverage in the terms of the GAP Waiver. Some lenders may allow you to cancel a GAP Waiver in writing at any time. Others may have stricter cancellation policies.

If you bought your car from anyone other than a dealer check out:

How to Cancel GAP Insurance

Or if you have your GAP insurance through a dealer (Honda, Dodge, Buick, etc..) Check out our directory of GAP cancellation articles.

Depending on the state, auto customers will have a defined period to return a purchased car and receive a full refund. The window of time to receive refunds on service contracts and other add-ons will also vary. 

Pro Tip: A best practice is to make sure you are comfortable with contract terms before signing (always read the fine print).

What Is Covered with GAP Insurance?

In a total loss, GAP Insurance covers the difference between the actual cash value of a car and the remaining loan balance. Comprehensive and Collision Insurance only pays for what the car is worth. Newly purchased cars depreciate quickly, so they are often worth less than the loan balance on them.

GAP Insurance from dealerships like Ford and Toyota may also cover the deductible on your Comprehensive and Collision Insurance. Check the terms on your GAP Insurance to see if the deductible is covered.

Mechanical failure and missed loan payments are not covered by GAP Insurance, so stay up to date on maintenance and payments.

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Who Needs GAP Insurance?

Customers of new cars with loan balances higher than the car’s value should have GAP Insurance. Anyone leasing a car should also have GAP Coverage, but that’s usually included in your lease agreement (ask to be sure).

Pro Tip: If you want to avoid GAP Insurance on a vehicle purchase:

  • Pay for the vehicle with cash and avoid a loan.
  • Pay a large enough down payment that the loan balance is never higher than the value of the new car, even after depreciation.
  • Purchase an older vehicle that won’t depreciate too quickly.

Frequently Asked Questions

How long do I need to have GAP Insurance?

You only need GAP Insurance when the car’s value is less than the balance on the loan. Once you have paid down enough on the car to avoid this situation, you no longer need GAP Coverage.

Does GAP Insurance expire?

As long as GAP Insurance is on your policy or loan terms, and your payments on the policy are up-to-date, GAP Insurance will not expire. Once you owe less on the loan than the vehicle is worth, you don’t need GAP Insurance any longer.

What happens if I don’t use my GAP Insurance?

Having GAP Insurance does not mean that you will need to file a claim. GAP Insurance protects you from a sudden financial responsibility if your car is totaled and you have a remaining loan balance after the actual cash value payout.

Does GAP Insurance cover a blown engine?

GAP Insurance does not cover the mechanical failure of vehicles. Check your auto warranty instead to see what protections are available.


Ford (2022). Ford Credit Vehicle Protection. Ford.com. Retrieved January 3, 2023, from https://www.ford.com/finance/vehicle-protection/#gapcoverage

Toyota Financial Services (2023). Guaranteed Auto Protection. Toyota Financial. Retrieved January 3, 2023, from https://www.toyotafinancial.com/us/en/vehicle_protection_plan/guaranteed_auto_protection.html

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

We’re here to help you simplify car care and save, so this post may contain affiliate links to help you do just that. If you click on a link and take action, we may earn a commission. However, the analysis and opinions expressed are our own.


About the Author

FIXD Research Team

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

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