Can you cancel a Gap Insurance policy? The simple answer to this is ‘yes’ you can, as with many types of insurance policies, but where do you stand if you wish to do so?
Gap Insurance is quite an unusual type of Insurance in that it is typically over a period of a number of years. So if you take say a 5 year return to invoice policy, and sell the vehicle after three years, what can you do over your gap insurance?
Gap Insurance transfer or cancel?
One option is to possibly transfer your gap insurance policy onto a new vehicle. Not all Gap Insurance policies have this feature, so it is best to check. However, if the cover has a ‘transfer’ feature, then subject to terms and conditions (usually the new vehicle must be of no higher value than the old one), you can transfer the remainder of your cover over. Bear in mind that there is quite often an administration charge made by the insurer to do this. On a cheaper policy it may well be just as cost effective to buy a brand new policy, especially if you have only a short period of cover left to ‘transfer’
The second option is to cancel the policy altogether. However, do not assume that you will be due any refund if you do this. Indeed most Gap Insurance policies sold over the last few years do not have any redemption if you cancel them, that is to say the insurer will not pay any money back to you for unused premium.
However, the ABI recommendations for Gap Insurance have suggested that insurers should chnge how they operate in this circumstance. It is only a recommendation, but the ABI have suggested that is would be fairer to consumers to be able to cancel the gap insurance policy, and a ‘pro rata’ refund be made for any unused premium.
Even though it is just a recommendation, many insurers have taken this on board and are now including this feature in the policy terms and conditions in 2012. Not all policies have it now, but expect that many more gap insurance policies in the market place will have this by the end of the year.
There will be stipulations to how your refund can be made, for example the insurer may well charge an administration fee to do this for you. However, if you are buying a policy for an extended period, say 5 years, you now have the option to transfer ( depending on the policy), or indeed cancel and get a refund for the period you do not use.
Other Gap Insurance changes?
Do we expect any other changes in Gap Insurance features in 2012? Well there are certain features on policies that may well change this year. Many Gap Insurance policies have had a ‘cap’ on the value of the vehicle you purchase. For example, some policies that cover ‘return to invoice’ style can be limited to a percentage of the Glass’ Guide Retail Value (between 100% and 110%). This feature is likely to change this year, as many policies now feature no limit on purchase price already.
Gap Insurance is constantly evolving, and with many insurers entering the market, they are competing to produce the very best levels of cover for the consumer. Expect more Gap Insurance changes to make your life easier!