Does gap insurance pay for negative equity?

I owe more on my car than it's worth currently. It was just totaled and I have gap insurance. Am I covered? I can't afford to carry the negative equity with me in a new loan.

Answer
“Sorry to hear about your accident, but you do have some good news! Gap insurance will eliminate the negative equity on your car loan
Negative equity refers to a situation where you owe more on your loan than what the vehicle is worth. If this happens when your car is totaled, gap insurance would cover the difference and pay off your negative equity. Essentially, it bails you out of an upside down car loan, although you will have to consider where to purchase a new car.
Without gap insurance, you’d have to either pay off the difference yourself or roll it into a new car loan.
Because your car was totaled in the accident, you may be shopping around for a new vehicle. Don’t forget to save money by shopping around for car insurance. Use the Jerry app to compare rates and find the best coverage and price for your needs.”
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Emily Maracle
Answered on Aug 16, 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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