A bad dose of Karma

I'm sure you've encountered someone that just doesn't listen or follow sound advice. It doesn't make sense, and it can be quite frustrating when you're trying to help but the other person doesn't seem to care. What is really infuriating though is when things go wrong (as you predicted), and the person in question tries to do some back pedalling dance to get out of the crap that they've got themselves into.

There are moments where you can say I told you so, but its another thing when innocent people are put in harms way. So imagine the shock when I heard this sorry saga the other day.

A lady told me of her niece that was very materialistic, needing to flash her over-priced accessories as a type of status symbol to impress upon people how cool and successful she is. Unfortunately taking out a personal loan to fund such trivialities doesn't impress me at all. Taking out a personal loan for a car that you wish to use as a status symbol is equally unimpressive. Deciding that a personal loan would be better than a car loan, and I have to question whether the person really understands finance and their obligations.

A car loan requires certain checks:

  • you to have a drivers license, (if you are the one driving the car)
  • comprehensive insurance
  • disclosure of any driving relating offences

These checks are designed to minimize and mitigate risk to the financier, and the car itself is used for security against the loan. The stipulation for comprehensive insurance is so that the finance company can still recover the debt in the event that the car is written off. With a personal loan you can by-pass all of these checks and you can buy a fancy car to flash around as a status symbol.

Unfortunately comprehensive insurance is not something that someone can flash around as a status symbol, so why bother with the cost of getting it? Why bother when it's not even stipulated in your loan agreement? Step in the good Aunt who berated her niece and arranged for a cover note for the car. The cover note covered a period of seven days before the full policy takes effect, but only when the premium is paid.

Everyone has experienced something breaking down just outside of warranty, so imagine the drama of a car crash just outside the period of cover for your insurance. (The niece did not pay her premium). Now lets add to that the niece phoning her aunt in hysterics about the accident and confessing that she hadn't paid the premium. Not thinking properly, the Aunt tried (once again) to help her niece by paying for the premium there and then in the hope that everything will be all right.

But its not all right because suspicions are going to be raised, especially with the following combination:

  • An insurance premium being paid on the day of an accident
  • The premium being paid by someone else that is not the policy holder

It gets even better (if you like Karma). Insurance of any kind is usually voided if you are engaged in any sort of illegal activity that may have contributed to the incident. So... how did the niece get involved in an accident in the first place? Speeding through a red light. Insurance or no insurance, if the niece gets a conviction for dangerous driving you can bet your bottom dollar that the insurance isn't going to cover her. But the insurance company isn't waiting around to see if the driver is convicted, they're already investigating possible fraud - and what company wouldn't when a payment is made on the same day as the accident (and by someone else).

So where does that leave everyone? It leaves the Aunty unknowingly complicit in perpetrating insurance fraud, the niece with a personal debt, no car, and maybe a dangerous driving record. Lets not forget the damage to the other vehicle that could be claimed against the niece as well.

Only time will tell how this will all end, but I'll keep you posted.

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