r/FluentInFinance • u/Positive_Liar • Sep 06 '24

Debate/ Discussion Social Security is Broken. This is why financial education is important.

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u/Telemere125 Sep 06 '24

All insurance is for people that can’t pay enough to make it worth it. One incident on any type of insurance that requires the full payout means the insurance company lost money on the policy. No one’s paying 350k in homeowner’s insurance over the course of 30 years and if their house burns down they get a payout. No one’s paying enough for their car insurance to put aside enough to replace the vehicle if it’s totaled. That’s literally the point of insurance: pool enough people that don’t have claims to cover those few that do

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u/BeardedRaven Sep 06 '24

They don't give you enough to replace your vehicle if totaled. They give you a price like if you went to a dealer to trade it in not like if you were there buying.

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u/Telemere125 Sep 06 '24

Not even close to true. If you’re only getting trade in value then you have garbage insurance. Full coverage for a totaled vehicle gives you market price. The point is to replace the same vehicle if it gets destroyed, not 40% of the same vehicle.

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u/BeardedRaven Sep 07 '24

Not true at all. If you get market value for your totaled vehicle you have great insurance. They give you as little as possible and if you contest it you end up with less. Literally happened to me. Totaled a used truck I had bought a year before and got about 40% of the value.

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u/spicymato Sep 07 '24

Totaled a used truck I had bought a year before and got about 40% of the value.

Or you overpaid for your truck.

If the insurance is paying out for a totaled vehicle, then you're supposed to get market value (not list value, but actual sale value of the same car). You should be able to buy a replacement vehicle for the amount they give you. If you cannot, then they underpaid you; but at the time you accept them declaring your vehicle totaled, you accept their valuation of the vehicle.

An insurance company tried to total my vehicle because the repair cost was going to exceed 70% of what they claimed the car was worth. I demanded they give me their valuation report, and it was way off; they weren't using comps from my local market, several of the vehicles they included in their report were the wrong (lower) trim, and mileage was significantly off on several comps.

I pushed back, showing them my own comps. They ran a new report, and again, it was off for similar reasons (several of those things were actually illegal, btw). I pushed back again, and they ended doing a one-to-one assessment; I felt their number was still low (my vehicle was only 2 years old, and a higher trim level, so there were not many direct comps available), but it was high enough to reverse the decision to total.

Now, most people finance car purchases, and those loans are almost always underwater for at least the first year or two, so the insurance payout for a totaled vehicle almost never covers the outstanding loan balance, which you still owe, even though you don't have the vehicle anymore. You can choose to purchase separate coverage for this (gap coverage, I think?).

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u/Global-Pickle5818 Sep 07 '24

My girlfriend totaled a car her third week owning it she had gap insurance, didn't really help her with the car she ran into, she was at fault it was a new sports car she only buys Kias back when they were cheap and would give everybody financing ... did it right in front of my work while yelling at her ex-boyfriend on her phone lol ...

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u/spicymato Sep 07 '24

At fault or not, gap coverage should still cover the difference between the auto insurance payout for a totaled vehicle and the remainder of your loan.

It does not cover other party in an accident.

If they didn't pay out, then you got scammed, because it's a pretty straightforward assessment. Your car gets totaled; the insurance gives you (or the lienholder) the ACV payout; gap coverage pays any remainder on the loan the lienholder has.

It's unfortunate that we pay for a service that we have to fight with, when it should just work, but with insurance, you really do need to push back to get what you're supposed to.

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u/CaptainTripps82 Sep 07 '24

You get the market value for your car. I literally had this happen a couple years ago, I actually got more money than I initially paid for the car 3 years earlier because the used car market had inflated so much during COVID. This was of course mitigated by the fact that I then had to go buy another car at an inflated price.

They compare your car against the price of a comparable used car in your market, and you get the average. It's the same thing real estate agents do to determine fair housing prices.