Gap Insurance

by Mary T.
(Minneapolis, Minnesota, USA)

Question: In the mail today, my friend received 2 checks in the amount of $169 from a major Auto Dealership in Minnesota. Each check referenced "Cancellation of Gap Insurance." Other than that small notation, there wasn't any additional correspondence included that would explain the reason for her sudden windfall.

Because she didn't request it be canceled, she's left to wonder why they were sent and if she should cash them.

Did they decide she no longer needed Gap Insurance? I believe she told me it's a 2003 car that she purchased in 2005 with a loan she is currently paying on.

Any thoughts or suggestions would be greatly appreciated.

Thank you.


Answer: Hi Mary,

There are typically three reasons GAP insurance is canceled:

1. Lender Request (vehicle repossessed)
   
2. Auto Insurance Request (vehicle totaled out)
   
3. Customer Request (vehicle sold or traded)
   

Outside of those three reasons there are only two things I can think of that may have happened here...

First would be a mistake by the dealership, which is highly unlikely, because they'd need a signed cancellation form from your friend.

Second would be that the GAP insurance company and their insurer went out of business and the dealer is sending back the portion of the GAP insurance that they are responsible to refund when a policy is cancelled.

It sounds as though she is far enough into her loan where GAP insurance is less likely to be needed in the event of total loss, but I'd certainly have her contact the dealership to find out what is going on.

I don't know that cashing the checks would bind her to anything that may come back to haunt her, but you never know.

In addition, it could be some sort of elaborate scam (who knows these days). Not from the dealer or GAP insurance company, but maybe from some other individuals. Definitely have her get in touch with the dealer to see what is going on.

Hope this helps...
Justin