Tower doesn't refund remaining premiums if car is written of

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duckDecoy

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#278488 19-Oct-2020 12:26

From Stuff: https://www.stuff.co.nz/business/money/123090995/tower-gives-with-one-hand-but-takes-away-with-another-customer-says

According to the story if a car is written off any remaining premiums are still considered due. If you have prepaid for the year the balance is kept. If you pay monthly you are meant to keep paying, and it isn't transferred to a new car.

AA says they have a similar policy.

Our experience with AA for SELLING the car (not writing it off) has been different, they refunded the balance.

SaltyNZ

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#2587715 19-Oct-2020 12:53

Seems reasonable to me; the premium is their estimated cost of providing you the cover. Why would they give you some back if you actually claim on it? Selling is different: you are cancelling the policy without having claimed on it and they should quite rightly refund you the pro-rata remaining premium.

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duckDecoy

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#2587718 19-Oct-2020 13:06

SaltyNZ:

Seems reasonable to me; the premium is their estimated cost of providing you the cover. Why would they give you some back if you actually claim on it? Selling is different: you are cancelling the policy without having claimed on it and they should quite rightly refund you the pro-rata remaining premium.

I agree with everything you said. I just hadn't thought about it before and found it interesting.

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#2587719 19-Oct-2020 13:06

My understanding was this was always the case. Years ago my car was stolen and written off and they deducted the balance of the yearly premium (I was paying quarterly) from the amount they paid out.

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mrdrifter

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#2587722 19-Oct-2020 13:10

Correct, this is nothing new and not just for vehicles. Its in the fine print for every house/car/contents insurer I've ever used.

gcorgnet

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#2587791 19-Oct-2020 14:48

A long time ago, I bought a car at a dealership, say 9K. within the first week, the car was rear-ended on the motorway and got written off. We had paid the insurance for the whole year and the insurance kept that to themselves and gave us just under 6k (what the considered the car to be worth).

It was quite an expensive exercise for an accident that we didn't cause and it's how we found out that indeed, the whole premium is kept by the insurer...

I guess there's just no wining with insurance companies...

frankv

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#2587837 19-Oct-2020 16:00

SaltyNZ:

Seems reasonable to me; the premium is their estimated cost of providing you the cover. Why would they give you some back if you actually claim on it? Selling is different: you are cancelling the policy without having claimed on it and they should quite rightly refund you the pro-rata remaining premium.

Not that I think it's a big deal, but I disagree. I'm sure the fine print says you have to pay for a whole year's worth of premium, so you are obligated to pay. But the premium is their price for covering you for a whole year. Not refunding part premiums on write-offs was a convenience (and slight benefit) for the insurance company in the days when people prepaid premiums annually and everything was done by clerks with ledgers. If your car was written off, the whole policy was closed, including the premium you had prepaid. Entirely reasonable. But nowadays, there's no particular reason why policies need to be annual. If you pay monthly or fortnightly or whatever, it doesn't seem fair to continue paying for cover on a car/wreck that now belongs to the insurance company!

Of course, if that clause was removed, premiums would be increased slightly to cover the amount of premium foregone for all the write-offs. So it's no big deal.

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#2587909 19-Oct-2020 18:07

duckDecoy:

If you pay monthly you are meant to keep paying, and it isn't transferred to a new car.

I know about annual premiums - no refund in the event of a claim but am not sure about the above.

Maybe they deduct the rest of the years premium from the payout?

allan

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#2588012 19-Oct-2020 21:24

Many years since I worked for an insurance company (so long ago that premiums by monthly installment was not even a thing), but this has been how it has worked since forever - the reasoning being that in the event of a write-off (total loss), the policy is paid out in full, therefore you have received the full value of what you paid the premium for.

floydbloke

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#2588023 19-Oct-2020 21:53

duckDecoy:

From Stuff: https://www.stuff.co.nz/business/money/123090995/tower-gives-with-one-hand-but-takes-away-with-another-customer-says

According to the story if a car is written off any remaining premiums are still considered due. If you have prepaid for the year the balance is kept. If you pay monthly you are meant to keep paying, and it isn't transferred to a new car.

AA says they have a similar policy.

Our experience with AA for SELLING the car (not writing it off) has been different, they refunded the balance.

That Stuff article would feel at home in the ridiculous headlines thread, and a 'money and consumer affairs' reporter should know better, knowing full well that the insurance company is acting entirely reasonably and within its rights. Customer buys a product and should pay for it in full, they just chose to spread the payments over a year. Say you buy a TV on hire-purchase, then your house gets burgled and some low-life thieves it, you can't just stop payments because you don't happen to have use of it any longer.

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#2588225 20-Oct-2020 11:27

You signed up for coverage for 1 year . You agreed to pay $xxx for that year , for that car .

Just because you no longer have the car doesnt mean you get your money back.

If you sign up to a Cellphone service for a year (or internet service), you cant get out of that commitment (easily) .

Im not saying its morally OK, but I can see their side of things . Ive been through the same thing when I had a car written off.

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#2588290 20-Oct-2020 12:58

gcorgnet:

A long time ago, I bought a car at a dealership, say 9K. within the first week, the car was rear-ended on the motorway and got written off. We had paid the insurance for the whole year and the insurance kept that to themselves and gave us just under 6k (what the considered the car to be worth).

It was quite an expensive exercise for an accident that we didn't cause and it's how we found out that indeed, the whole premium is kept by the insurer...

I guess there's just no wining with insurance companies...

This is where "agreed value" is the way to go rather than "market value". In your case what you got paid was probably the trade in price for a car of that model in average condition. You might pay a slightly higher premium for agreed value but you know what you'll get paid out and won't take such a big hit as happened in your case.

In my opinion insurance payouts for items like motor vehicles need to cover what you would need to pay to buy a like for like replacement, (same model, age, condition). Otherwise you run the risk of being seriously out of pocket just to get back to where you were, and that's not the idea of having insurance to start with.

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#2588320 20-Oct-2020 13:12

So the same argument could apply if you sign up for a 25 year life insurance policy?

If you die in the first year could they deduct the other 24 years of premiums from the payout?

I know they won't but it's the same argument isn't it?

I'm taking about level premium policies which have a fixed payment and term.