Is my friend's insurance company screwing them?

[XMan]

A friend of mine totaled their car. There is 12,000 left on the balance of the loan.

The insurance company is only going to pay 9,000.

Can they do that?

 

[db]

Depends on the policy. Some are current value. Some are replacement value.
BTY, the amount of the loan wouldn't matter, unless you had loan insurance.

 

[Tominator]

Yep! They only insure fair market value.

That is one of the biggest reasons never to take out a loan for more than 3 to 4 years on a new car and 2 to 3 on a used.

It's called 'being upside down.' You always owe more than the car is worth.

 

[Sundog]

<< It's called 'being upside down.' You always owe more than the car is worth. >>


Exactly:frown:

 

[chuckieland]

how about leasing?

 

[N8Magic]

BUT, most companies offer a "replacement value" clause that costs about 3 dollars a month. This covers you for the first 2 years and will give you replacement value on your car (ORIGINAL price paid) if you total it in the first 2 years.

By the time the first 2 years are up on a new car, most owners with 5 year loans are not upside down anymore.

 

[XMan]

Yeah, the worst thing is, they've only had the car for 9 months or so.

 

[bozo1]

Yet another reason to make the largest downpayment you can in order to avoid such things.

 

[XMan]

Sure, that's a great idea, bozo1, but not everybody has that kind of money.