Collision through my auto financing

by JeffClair1979 » Tue Jun 08, 2010 07:19 pm

I pay for the collision policy each month in addition to my auto loan payment.

I recently had an accident, and when i filed the claim through this policy, they paid Wells Fargo the repair cost instead of the garage or me. Wells Fargo put this insurance payment toward my principal balance.

Should Wells Fargo now coordinate paying the garage, or pay me so I can pay the mechanic, or am I now on my own??

Thanks!

Total Comments: 4

Posted: Tue Jun 08, 2010 09:04 pm Post Subject:

You don't have honest-to-goodness auto insurance with liability and collision coverage?

Should Wells Fargo now coordinate paying the garage, or pay me so I can pay the mechanic, or am I now on my own??



You need to read the language of your insurance contract to have that question answered. If you are allowing Wells Fargo to carry the collision insurance on the vehicle in which they have a security interest, then it is quite possible that the value of the "loss" is payable to them and applicable toward the loan principal, even if you would prefer to have the money to fix the vehicle. The assumption is that this would occur in the case of a total loss.

But, like credit card contracts that allow the lender to apply payments to a particular balance they choose not the one you would prefer, the collision insurance contract written for Wells Fargo is written with their best interest in mind, not yours. They could care less if your vehicle is drivable, their only concern is that your debt is eventually retired. So if the vehicle is damaged in a collision the language of the contract could easily state "any loss payable" is paid to the lender, who can naturally choose to do with the money as they please as long as it does not harm you -- as in take the money and do nothing with it.

So perhaps you think auto insurance with collision is too expensive? Or are you driving with no liability insurance thinking the collision policy that Wells Fargo is charging you for is the same as a personal auto policy? Either way, your thinking is faulty.

If you had a personal auto policy with collision coverage, the insurer would (1) pay to repair the vehicle or (2) pay the lienholder the actual cash value (ACV) of the vehicle at the moment prior to the collision if a total loss. If, under scenario (2) that was insufficient to cover your debt to the lender, you would have no vehicle and owe the balance of the debt to the lender.

This is the purpose of "gap" coverage. If the collision loss was less than the debt balance, then "gap" coverage would supply the difference, leaving you with no vehicle and no debt.

And I can almost guarantee that a true PAP with collision coverage would be less expensive than a minimum liability PAP and leaving the lender to supply the collision coverage.

Posted: Tue Jun 08, 2010 09:07 pm Post Subject:

Thanks for the reply.

Probably not a question for you, but I wonder if I have to make a car payment for a while now since I'm a year ahead of my payments!

Posted: Tue Jun 08, 2010 09:14 pm Post Subject:

That's a matter for your loan contract to determine. Most contracts have a clause that requires a monthly payment to be made even if payments are ahead of schedule. While they could not repossess the vehicle since your payments are not in arrears, they could assess a "late payment" fee for not making a payment.

Talk directly to Wells Fargo about the situation.

Posted: Tue Jun 08, 2010 10:31 pm Post Subject:

Should Wells Fargo now coordinate paying the garage, or pay me so I can pay the mechanic, or am I now on my own??

YES! If you want the vehicle repaired, but then they will add back the principle payment..

I wonder if I have to make a car payment for a while now since I'm a year ahead of my payments!

Yes, if this statement is true

Wells Fargo put this insurance payment toward my principal balance.

Call them to double check...but I've never heard of a principle (only) payment that negated your installment contract..

What Max had told you is WAY more important though, if your lein holder has put forced coverage on your vehicle, it is most likely ONLY collision and comp (pretecting THEIR interest NOT yours)...you need to find out NOW if you have the state required liability limits in place, (which probably are not adequte, but may keep you from a finacially disasterous judgement).

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