Is this how insurance companies work?

Question

My daughter had her unattended legally parked car hit and totaled out by a drunk driver with no insurance in a stolen car. The owner of the car had no insurance and both of these people are in jail according to the police report. My daughter has full coverage insurance which paid off her car. She now does not have a car. The insurance company told her it is up to her to buy another car. She has only had this car a few months and paid 2,000.00 down out of her income tax money. She now has to come up with another $2,000.00 for a down payment for another car. Is this the way it works with insurance companies. It seems she is being punished for a drunk drivers actions. She had a car and now she does not have a car and none of this is her fault.

Answer 1

If the car was new, it became used & depreciated the second she drove off the lot.  Insurance is only obligated to pay the actual cash value of the car which is its value at the time of the claim, not its value a couple months ago when she bought it.  When she drove off the lot she immediately lost a couple thousand dollars due to depreciation.  This how both insurance and car ownership work!

Answer 2

the insurance pays off book value of the car  unfortunately the cars always go down in value and your daughter owns a car that is worth less than she paid for it

Answer 3

her only hope is to go through the papers (auto ads) and talk to auto dealers and get something in writing regarding the value of her car.  Kelley Blue Book  kbb.com is good  and you want to check it to sell, not to trade. hit the insurance company with proof that the car was worth more than they are paying her.

The fact that she bought it with her tax refund works in your favor because that makes it very new. was there an independent repair shop that determined her car was totaled?  If so, a statement from them as to the value of the car prior to impact would be good.  A Company inundated with paper will sometimes fold just to shut you up.... lol

Let me guess.... Allstate??

Answer 4

Yes this is how insurance works. The insurance company owes your daughter for the Actual Cash Value (ACV) of the car. The ACV value has nothing to do with the down payment already spent or the fact that a new down payment will be needed for the replacement car.

Thousands of people are in this situation each month and while it might seem fair this is the way it works. People have tried suing the at-fault person for the down payment money but the court denies their lawsuit because decades ago the courts (not insurance companies) decided that all that was owed was the ACV of the damaged property.

Even if the at-fault person had insurance they too would only owe the ACV. Your daughter has no legal standing to seek any down payment money for the replacement car. Even though the at-fault party here was uninsured they too do not legally owe her for a new down payment.

Your daughter isn't being punished. She was just unlucky enough to get hit by a POS drunk driver.   I would suggest that your daughter makes sure that her insurance company sues the drunk driver to get reimbursement on the claim. If they do this she MIGHT get her deductible back some day.

Answer 5

Depends on what state you're in, seems crappy though

Answer 6

OK, if the owner DID have insurance, they still wouldn't be liable, because the car was stolen.

Yes, this is how it works.  Even if the driver wasn't drunk - even if there WAS insurance, they never pay more than actual cash value of the car.

Your daugher is being punished for borrowing money on a depreciating asset - the car.  If she bought a $2K junker, and it was totalled, she'd get $2K.  Which she could use for another $2K junker.  

You can't punish the at fault driver, by making them pay for depreciation of the vehicle and high interest rates, or your daughter getting "taken" at the dealer's.  Likely that $2K she paid on the car, mostly went to sales tax, tags, title, etc.  She's lucky she got payoff.

Answer 7

unfortunately yes thats how it works.  The insurance company will not pay the insured if the car has a lein out on it.  They will pay the leinholder.  If they give more than the loan then she would get the overage.  As far as her down payment thats how it works, if she were to sell the car she would have to pay off her loan first as well.  If the other person had insurance then she still wouldnt get any money from that either, they too would pay the leinholder.  Sorry, I know it sucks but thats the way it goes.