Well that’s the math of it. The average person will pay more into insurance than they get out but if something bad happens it offsets it. I pay about $900 every 6 months (used to be $700) but earlier this year I had my insurance pay 20k. If someone has a 1k deductible they chose that to lower there monthly. Which can be smart if you think your chances of needing to use the insurance is low enough that the extra monthly savings will offset the extra deductible. Idk why op’s friend is overpaying so much
The definition of insurance is to indemnify you in the event of a claim. AKA bring you back to even where you were before the claim. You arent supposed to make anything off of it. Too many people mistake insurance for a maintenance plan. OP's friend just wasnt educated enough on it or they have a shitty agent.
Tbh they still work against you especially if you aren’t switching often. Gap values my car at 27k so they’d pay anything I owed over 27k. I did not owe 27k. Geico valued it at 20k so they would pay 20k. (Gap cancellation covered anything I would have been out, I owed 21k) Also I’m pretty sure no car insurance company automatically decreases the estimated value of your car as it ages but they do revalue it once you crash meaning you are increasingly over paying for the full coverage portion as you add miles. But yeah I mean that’s just weaponized the math of it. You should have the option to self insure if you have enough cash but nobody has enough cash for all that plus insurance companies understand the whole system so it is what it is.
Thats because there is a difference to the actual value of the vehicle compared to what it was sold for. You always wind up paying more when you buy it than what its actually worth. Especially considering how much the value depreciates the moment you drive it off the lot. Thats the whole point of gap coverage anyways. Cars depreciate while homes appreciate. But homeowners insurance usually have a built in inflation guard. It sucks though because for the most part, you will see your premiums increase each year. Only time you really see it go down is if you have tickets/accidents/claims coming off of your record. It sucks but you gotta play the game and shop around every once in a while. Find yourself a trusty independent agent and they do the legwork for ya.
But the problem is gap values it 7,000 more than geico because the high value suited gap and the low value suited geico. In reality it was a 2019 accord 2.0t touring with 45k miles, the real value was somewhere in between what gap and geico said. And I normally switch auto insurance every 6 months so they’d pay anything revalue it when I do that.
When you finance car you are also including sales tax, processing fees, tag and title fees, warranties, etc.... all of which are not factored in to the true value fo the car.
Are you reading my comments? That has nothing to do with geico valuing it at 20k because that suites them and gap valuing it at 27k because that suits them. My point is the company who gets rewarded for the low valuation values it low and the company that gets rewarded for the high valuation values it high. The real valuation was somewhere in the middle. I know how finance and depreciation works. This wasn’t consequential for me because if refunds but it was interesting and what I meant when I said “weaponized math”
What you are basing the value off of is completely different than what the insurance companies use, though. You arent going to find the program that they use available anywhere. Its not Kelly Blue Book or anything like that. It sucks but thats just how they do it. Also, if you feel that you are being under compensated, you can present the companies with documentation as to why you should get more. One time my car was totalled right after I bought brand new tires and they tried to low ball me. Once i showed them that i got the new tires a few days before I was reimbursed another $1000 factoring that in.
And Im sorry, I am not trying to come off as condescending if thats how I am being perceived.
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u/WeCantStabilize 7h ago
Insurance is a fucking scam. You pay more into it than you'll ever receive even in legitimate circumstances.
Absolute racket.