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Say you haven't paid off your car yet and you have it parked on the street.
You only got the bare minimum insurance your state requires and you don't have any other insurance (i.e. homeowners.)
One day, some driver rams into your car, totals it, then drives off.
There are no cameras on the street and the police have no idea/proof of who did this.
What are you options now?
Doesn't pretty much every financing institution require you to have fully comp. if you have payments? I assume specifically to avoid such a situation, as many would stop paying on it, and the financier won't have a car to repossess.
Doesn't pretty much every financing institution require you to have fully comp. if you have payments? I assume specifically to avoid such a situation, as many would stop paying on it, and the financier won't have a car to repossess.
So to my knowledge, the situation is impossible.
Exactly, except if the car has more owed on it than the insurance company is willing to pay. Then the car's owner would have to come up with the difference.
Doesn't pretty much every financing institution require you to have fully comp. if you have payments? I assume specifically to avoid such a situation, as many would stop paying on it, and the financier won't have a car to repossess.
So to my knowledge, the situation is impossible.
^What he said...... unless you just dropped the coverage very recently and haven't been caught yet by your lender.
FTR: state minimums are NOT set to the same minimums as the financial institutions! A state minimum sets the limits for what your insurance will pay to someone else if you hit them. If you call an insurance company to get insurance, they ask, "is this car financed?" You say "yes," and they quote you full coverage. You say you don't have enough, they'll sell you a liability policy so that you can legally drive, but they make you send in a piece of paper stating that you understand that you're waiving coverage on your car, so in the event it's stolen, someone hits it and drives off, etc.
Lenders generally will pull out a policy on your car "for you" if you don't have insurance; it's pretty much always 2x what the highest insurance you could find was. So, say for instance, you didn't want to pay $300/mo for insurance... well... they're going to tack on their insurance for you, and it's probably going to run something like $450-600/month.
That said, they generally send you a whole load of paperwork warning you that they're going to do it, and your monthly payments will have jumped accordingly. The insurance doesn't go on there automatically; they usually wait a few months before they do this.
Consequently... if you only had liability, your car was parked on the street, got totalled, and the person who hit it booked, and the financier hadn't insured the vehicle... you would be responsible for the value of the loan.
Say it was a new-ish Corolla that you can get about $4k for in its current, totalled state. Your loan was $18k, and you'd paid $2k on it. 18 - 2 = 16k; 16 - 4 = $12,000 you're now responsible for. The bank is going to send you a bill for $12k. You're going to say that you don't have $12k, and they're most likely either going to take you to court and get a judgement against you (they'll win - you broke your contract) and you'll get wage garnishment; or, they're going to say that you can keep making payments to them, but they'll come after you and take you to court if you stop paying (they no longer have a car to repo).
In the meantime, it's going to be awhile before you'll be able to finance anything again.
Insurance sucks, but it sucks a lot less than the consequences of not having it on a car you owe money on!
If you have comprehensive coverage but you owe a lot more the it is worth you owe the difference unless you have GAP insurance.
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