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Will gap insurance pay me or my credit lender?
My car was totaled when I still had $13k left on the loan. The insurance company paid me $26K in total for the car, but I don’t know if that includes what I still owe. Do I need to pay off my loan with the money from my insurance payout? Or will my gap insurance pay the $13k that's left on my loan?
Joshua Levy · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Understanding how to navigate
car loans
and insurance payoffs can be tricky. Gap insurance will not cover the remaining $13k on your loan because it only applies to upside-down loans.In short, an
upside down loan
is when you owe more on a car than it’s worth. Gap insurance will cover the difference between your car’s value and the amount owed if your car gets totaled.For example, let’s say you owe $27,000 on your car, but it’s only worth $26,000. Even with your insurance payout, you’d still owe $1,000 to your lender. That’s where gap coverage would kick in to pay your lender the remaining $1,000.
Since your car is worth more than your debt, your Gap coverage won’t help with your debt. Unfortunately, you need to use part of your insurance payout to pay off the loan. While that may seem like a big loss, you can offset the cost by
saving on other car expenses
like car insurance with Jerry
.A licensed broker, the Jerry app helps users save an average of nearly $879 a year on car insurance. Just download the app, answer a few questions—and Jerry will help you compare personalized quotes from over 50 top providers like Progressive and Nationwide for free. That way, you can make sure you’re getting the lowest possible rate before you settle on a policy.
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- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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