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How do I understand what my gap insurance covered?

I don't understand what my gap insurance paid for. I owed $10,000 on my car. My insurance valued my car at $8,000. There was a refund of $1,000 for an extended warranty. The gap insurance paid $1,000 to cover my loan. Is this amount right? Shouldn't it pay more?

avatar
Emily Maracle · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“Your
gap insurance
 will normally cover the difference if you owe more on your loan than what your vehicle is worth.
Since the difference was $2,000, your gap insurance would normally pay the full amount. However, since you received a refund of $1,000 for an extended warranty, that amount went directly to your lender.
Normally, extended warranties and other loan services are rolled into your monthly payments. Since you received a refund for the unused balance, it was applied directly to your loan.
This reduced your loan balance by $1,000, which made your remaining balance $1,000. This is why your gap insurance only paid $1,000, as this zeroed out your loan.
“
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