Insurance , total loss vs settlement?

[Sneeky]

Hi

Can anyone help me understand this.

If I have a settlement value of say R100K on a vehicle through a banks finance department, how would the 'total loss' figure differ from this settlement value, if any?

 

[Fazda]

They remove any future compounded interest if you settle.

E.g. If I look at my statement, I still owe R105000 and some change, but my settlement figure is closer to 100k, as i won't be paying it off over 5 years. Is that what you were asking?

 

[Sneeky]

Hi Fazda
Thx but not entirely.

I understand the statement versus settlement scenario, however in writting off a vehicle, they get another number apprently termed 'total loss'.

My question is how this differs from the settlement figure?

Essentialy I would think it would be the same as the settlement, as the insurance settles the bank (the outstadning settlement of the vehicle) but this concept of total loss has me stumped.
The bank says their legal department has to issue a letter with a figure of total loss.

 

[superskully]

Your question does not seem to be clear (what do you mean by total loss).
As Fazda mentions, for a financed vehicle there is a balance and a settlement (which he explains).

The only other aspect i can think of regarding your question is the difference between what an insurance would pay off and the settlement value.
The answer is that an insurance will pay market/retail value of the car, which (esp in 1sy year) is usually lower than the settlement value. So there is a LOSS.
The car depreciates a lot faster than the capital you pay off (as in the first year you are paying the most interest).

 

[Sneeky]

I just managed to speak to somebody at standard bank legal.

Apparently the number will not differ from the settlement value.
The term 'total loss' is given to the letter they issue with the settlement amount in the case of a vehicle being written off.

Sry for the confusion but it seems clearer now after speaking to the bank.
Apparently the insurance cannot go on a settlement document issued to the customer, they require the letter of total loss stating the amount from the bank first before they can honour the claim.

This letter is formally requested from the bank by the insurance comany on formal insurance company letter heads (not the vehicle owner)

 

[the graduate]

Your question does not seem to be clear (what do you mean by total loss).
As Fazda mentions, for a financed vehicle there is a balance and a settlement (which he explains).

The only other aspect i can think of regarding your question is the difference between what an insurance would pay off and the settlement value.
The answer is that an insurance will pay market/retail value of the car, which (esp in 1sy year) is usually lower than the settlement value. So there is a LOSS.
The car depreciates a lot faster than the capital you pay off (as in the first year you are paying the most interest).

This is true, however, you do get a "top-up" cover in which the insurance will settle the "outstanding amount", that is, the total amount you owe the finance house. Check you car's value every 6 months and ajust your cover accordingly...once the car's "retail/market" value is more than the settlement amount, then you can drop the "top-up" cover...

 

[superskully]

I am guessing the insurance will check the settlement value and the retail value of the car.
If the retail > sett, then they should pay you the difference.
If retail < sett then you have to pay the difference.
Unless you have a different policy (like shortfall...), but genreall insurance policies will always pay the retail value. Make sure you check this.

 

[Fazda]

Top up or Shortfall insurance is essential if you are paying off an amount that is greater than the retail amount of your car.

I do not have top insurance on my present deal because I owe far less than retail, but anyone who owes more than retail is playing Russian Roulette without Top up.

 

[Sneeky]

Normally insurance companies pay the book value of the car or the settlement, whichever is lower, not the retail value in the case of it being written off, stolen,etc.
This is really when 'top up' comes into play to cover you if the vehicle is financed.

Luckily our fleet insurance pays retail value of the vehicle at the time. It was a few years old but the retail value of mine was almost R60K more than the book value, The settlement value was is as close as dammit to the book.

The insurance settles the bank with the outstanding amount owing (settlement value) and the difference between that and the retail they pay to me.