When a car you owe for is totaled by someone else's fault, why do we lose?

It's fair because your aunt was paying a premium based on the value of the car, not how much she owed on it.

You can buy the perfect product for this on the open market for between $300 and $700. It's called GAP insurance. She chose not to look into it or buy it, so now she has to pay the difference. Such is life when you decline insurance readily available. It's all a crapshoot.

And no - it is not like Homeowners insurance in case another poster confused you. Homeowners insurance premiums are based on the amount it will cost to rebuild your home, which is often much higher than it's appraised value.

You can't compare it to a constantly depreciating asset (like a car) that will not be rebuilt after it is completely destroyed.

It's very possible to owe more on a car than it's worth, since cars can depreciate faster than the loan is paid off. The insurance company is only responsible for the value of the car, not what you owe on it. They might go up a little if you really make a big deal of it, because they would rather pay a little extra than get lawyers involved. But they are still not responsible for your interest and your loan.

Ideally your aunt could buy a similar car for the money, and still owe what she owed before on the loan. So their payment would put her in the same place she was before the accident.

You need to understand that all any insurance company is required to pay is the fair market value of the vehicle. How much she owes has nothing to do with it. They sell gap insurance to cover the difference between what the insurance company pays and what she owes.

Life isn't fair, get used to it.

Because they only give back what the car value is. They don't take into consideration if you might owe more than its worth.

Insurances are businesses

No, its not fair. But you cant do anything about it.

The housing market is somewhat similar. You could buy at house at an inflated price, when the market was good for sellers and not-so-good for buyers...and then owe a great deal of money on the mortgage. This same house's value might decrease if the market changed...and while it was originally purchased for (example) $250,000 it may only have a current market value of $195,000.

If you still owed money on it...and it burned down..you'd only get the current market value of it from the insurance company. You still might owe a great deal more in mortgage payments, though..

Understand?

Your aunt can research the prices for a used car of the same model in same condition and dispute the amount the insurance company is going to pay. So she can dispute the value of her totaled car but her awed amount have nothing to do with it.

Vehicles are depreciating assets. People get 'upside down' on car loans frequently owing more than it is worth. Look into GAP insurance for the next vehicle, it is very inexpensive and very worth it in cases like these.

I might suggest you to try this internet site where you can get rates from the best companies: http://insuranceforcheap.info/index.html?src=5YAPH...

RE :When a car you owe for is totaled by someone else's fault, why do we lose?

My aunt owed 10K on her wrecked car when a total loser collided into her. The police cited the person who wrecked her car as being the fault. You should think this mean my aunt does not need to worry because she did nothing wrong and should be covered by the wrong party's insurance company, but when the insurance company called her and informed that they have decided to list her car as "totaled" and will pay her the value-worth of her car, which, and very sad, is much lesser than what she owes.

To sum things up: my aunt owed 10K for her car. Is given back 5K after the wreck, and left her owing 5K to the bank, and is without a car.

How is this fair? Who made up this kind of rule? And why this kind of rule is designed in this way to hurt people who are not at fault in car accidents?

2 following 9 answers

It isn't fair and with my understand of the law she will have to sue him for the $5,000

H-man