Can negative equity impact gap insurance payments?

I still owe $4,000 on my car loan after my insurance payout. My gap insurance is denying my claim because I have negative equity on my car. How can I get them to pay off the remaining balance?

Answer
“Every loan and gap insurance policy has different terms and conditions. There is most likely a clause in your gap insurance policy that states they will only cover the balance of your current vehicle.
If you rolled a prior car loan balance into your current one, this is considered to be negative equity. If you didn’t have gap insurance or had different gap insurance coverage on your prior vehicle, your current coverage won’t cover your remaining balance.
The best thing you can do is make sure their calculations are correct. Look into your finance paperwork and find out the total amount you owed prior to buying your car. You’ll also need to look up the terms and conditions of your gap insurance and loan.
If you find any discrepancies, you may be able to negotiate with your gap insurance company to get a claim approved. “
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Emily Maracle
Answered on May 03, 2021
Emily Maracle is a car insurance specialist living in New York. Originally from the Pacific Northwest, she has a degree in English Literature and a background in customer service. She enjoys cooking, gardening, and living sustainably. In the future, she can't wait to upgrade to a hybrid or electric car.
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