Gap Insurance Requirements
First, let's take a look at when gap insurance is required. Generally every lease agreement requires gap insurance, and for the right reasons because this is a great protection for the buyer. The buyer is still financially responsible for the leased car even though the car is still owned by the manufacturer or dealership. Usually gap insurance is built into the lease agreement and is part of the lease terms.
Other than lease agreements, generally gap insurance is not required. But for reasons of ignorance or greed, many dealerships or car loan departments often automatically add gap insurance to the buyers loan and sometimes without the buyer being aware of this. When purchasing a new car you do have the right to deny gap insurance. Before you deny gap insurance though, make sure you don't need it.
When Gap Insurance is Not Needed
Although gap insurance is highly recommended in many new car purchases, in some cases gap insurance is not needed. If someone has enough cash reserves to cover the gap in the insurance payoff and the value of their car, then they would not need gap insurance if they would rather use their money than insurance to cover that gap. Also, some insurance companies already provide gap insurance, or a similar loan pay off type of insurance, built into the vehicle's auto insurance policy, so obviously it would make no sense to pay for an insurance policy that one would already have. And, some loan companies offer a pay off benefit in the loan agreement. This means that the loan company will take care of the gap in value. In addition, some people may be purchasing a vehicle that is not over priced and therefore if the car was totaled, the vehicle would have the same value as the loan payoff.
How to Refuse Gap Insurance
So, you are not leasing a vehicle and you have researched your need for gap insurance and realize you don't want to purchase it. Tell your dealership or lender. That is all you should need to do to refuse gap insurance. Next, before you sign your loan papers, make sure you get an itemized list of everything that is included in your loan payment and make sure you are not paying for gap insurance or anything else that you did not authorize. If you still have problems, since gap insurance is a form of insurance and its sale is regulated by your state, you can contact your state insurance commissioner for further help in securing your rights to refuse gap insurance.