The fact that your car was a total loss does not change your loan repayment terms. Your legal obligation to repay the loan continues. If you have “gap” insurance, this type of insurance coverage might pay the difference between the amount of the insurance company’s check and the amount you still owe on the car loan.

What happens when you total a financed car with GAP insurance?

If your car is totaled and you still owe money on the loan, the insurance company will pay your lender for the car’s value, and you will be responsible for any remaining balance if the check is less than the loan amount.

Do you get money back from GAP insurance after accident?

Generally, you will not receive any type of refund on your gap policy – just like you don’t receive a refund on other policies that go unclaimed. Some drivers will pay for coverage their whole lives without making a GAP insurance claim. That’s just how coverage works.

Can car GAP insurance be refunded?

Typically, you should get a full refund on your GAP insurance if you cancel the contract within 30 days of purchasing the policy, though cancelation fees may apply.

How does GAP insurance work after a car is totaled?

That means, quite simply, that you’re going to owe more on your car than it’s worth if you took out a loan, a condition known as ‘being underwater’ or ‘upside-down’ on your payments. GAP insurance, or ‘Guaranteed Auto Protection’ coverage, exists to protect you from that condition.

What happens if you have GAP protection on your car?

If you are in an accident that totals your car and you have gap protection, you can breathe a sigh of relief. Once you auto insurance adjustor determines the value of your car prior to the accident, you or your leasing company or bank will be issued a check in that amount.

How does GAP insurance work if you have negative equity?

If you have car insurance, you’ll get the value between the amount owing to the finance company after your car’s insurance settlement has been paid out. If you have $5,000 negative equity, that’s how much gets paid out. And if your car loan is covered by insurance completely, or you have some money coming back to you, gap insurance pays nothing.

Do you need GAP insurance if your car is worth more than your loan?

If your car loan is nearly the same as your car is worth, gap insurance doesn’t make sense. If your car is worth more than your loan value, it’s no question – don’t bother with gap insurance. If you aren’t planning to keep comprehensive car insurance, there’s no point in buying gap insurance.