Is GAP insurance transferable if you sell the car?

GAP insurance can't be transferred to a new owner, but you may be able to get a refund. This guide covers why GAP insurance is not transferable, and what can pass to the new owner when you sell a car.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Feature Writer Rachel Bodine

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: May 24, 2022

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Things to remember

  • GAP insurance covers you when your loan amount is more than the value of the vehicle if it’s stolen or totaled
  • GAP insurance is not transferable when selling or refinancing a vehicle, since it is specific to the original loan conditions
  • Most warranties can be transferred to the new owner of the car if you contact the warranty company or dealership directly

If you sell your vehicle, it makes sense to ask yourself, “Is GAP insurance transferable?” Handing over ownership of your car doesn’t mean that everything else gets transferred to your buyer. While some vehicle warranties can remain intact across owners, insurance policies, including GAP insurance, cannot.

It’s worth knowing which coverage can stay with the vehicle and which you need to cancel or update before finalizing the sale. This article helps you understand what GAP insurance is, how coverage works, and what happens when you sell or refinance your vehicle.

What is GAP insurance?

Guaranteed asset protection insurance protects you if your car is stolen or severely damaged by covering the gap between what you owe and what your car was worth when it was totaled. Since it’s dependent on the vehicle and the terms of your loan, GAP insurance is not transferable if you sell or refinance.

A vehicle that costs more to repair than its total worth is considered totaled, and even if your standard insurance compensates you, you are still liable for any outstanding balance on your loan. With newly financed vehicles, this can be a considerable amount. GAP insurance protects you from being obligated to make continued payments on an asset you can no longer use.

While beneficial for some, these policies are not ideal for every situation, and it helps to know when you should consider added coverage.

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Is GAP insurance transferable when selling or refinancing a car?

When you sell your car, either to a dealership or a private buyer, you may have questions about any coverage you had on the vehicle. You should cancel your insurance to avoid paying any unnecessary costs. Since GAP insurance is not transferrable, you might be entitled to a refund of the unused amount, and any warranties on your vehicle might be transferrable.

GAP Insurance

Whether you are selling your vehicle to a private buyer, trading it in for a newer model, or refinancing your loan for a better rate, your GAP insurance is not transferable. Since your coverage depends on what you owe and what your car is worth, anything that alters the terms will affect your policy. Any rates paid in advance, however, are not entirely lost.

If you sell your car or pay off your loan early, you can receive a refund for the unused portion of your GAP insurance. Many companies issue a credit automatically, but it is good practice to contact your insurance company to notify them of the sale and find out how much your refund might be.

While refinancing a vehicle is not the same as selling it to a new owner, it can still affect your coverage. Refinancing your vehicle involves paying off your original loan and negotiating a new loan agreement, which cancels any GAP insurance you might have had. If your car is still eligible, it might be possible to purchase a new policy through your insurance.


As proof of ownership, your title transfers to the new owner upon completion of the sale. Most warranties, like your title, remain with the vehicle through a change of ownership, although it’s important to note this does not happen automatically.

Call the dealership or warranty company to initiate a transfer of the warranty. The new owner will also need to contact them to complete the process and update the information on file.

Why should you purchase auto insurance?

Auto insurance options are designed to cover injuries to people and damage to property as a result of a traffic incident. Liability insurance is a requirement in every state, but you may want to purchase added coverage depending on your situation. A new vehicle is an important asset, and protecting your investment can provide valuable peace of mind.

When To Consider GAP Insurance

GAP insurance is generally sold at the dealership when you finance a new car, but it’s also available from most insurance companies. You can usually purchase a GAP policy within three years of initial financing and only for the most recent models of your vehicle. It’s rarely available if your car has already depreciated, so it may not be an option if you have an older vehicle.

These factors can help determine whether you should consider GAP insurance:

  • Down payment amount. Paying less than 20% down when you purchase your vehicle
  • Length of loan. Agreeing to a long-term loan of more than 60 months
  • Value depreciation. Buying a car or truck that loses value quickly
  • Leased vehicle. Leasing a new or used vehicle

Financing a new car under these conditions means you should consider purchasing GAP coverage. It’s generally a requirement for you if your vehicle is a lease since you could face a substantial financial obligation if you lose the car to theft or damage.

When To Consider Optional Coverage

In addition to GAP insurance, you might consider optional coverage for specific circumstances that don’t involve collisions. Roadside assistance, mechanical breakdown insurance, or rental reimbursement can protect you if your car breaks down or needs repairs.

Is GAP insurance transferable? Final Thoughts

When selling your vehicle, it makes sense to wonder if your GAP insurance is transferable. Knowing what you can and cannot transfer when you hand the keys over to a new owner helps you prepare and ensure a smooth process.

Although GAP and other auto insurance policies are beneficial, they are not transferable if you sell your car. On the other hand, most warranties can remain with the vehicle if you contact the dealership or warranty company to initiate the transfer.

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