Who has a right to extra payments that an auto insurance company makes?

My sister's vehicle was totaled. She owes $14,000 on her loan and her vehicle is worth $12,700. She put in a claim for gap insurance and they said she had negative gap due to refunds that the dealership owes ($2,000). Is she entitled to the extra $700? Shouldn't it go to my sister instead of the bank?

Answer
“Your sister should definitely reach out to her lender. In a standard situation, gap insurance would cover the $1,300 that your sister owed and the loan would be closed.
Since she received a refund from the dealership and that money went directly to the loan, she is entitled to the $700 that was in excess. Her loan would now be overpaid.
It can take time for lenders and banks to process transactions like this. They may not have processed the dealership’s refund yet or applied it to the account. By reaching out to the lender directly, your sister will be able to get an update on the current state of her loan.
Also, be sure your sister keep records of everything in case she is asked to provide proof. “
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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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