Recently I have seen a few magazine articles and emails regarding the commodiziation of auto insurance? Reports from McKinsey, Nomura Equity, IRMI and others seem to have reached the conclusion that Auto Insurance is a commodity and the only difference is price. One would think that this is true given the amount of commercials that indicate immediate savings by switching.
As an Independent Agent, I think differently on this issue. I represent a variety of auto insurance companies, and while they are based on the same framework, each one has different exclusions, restrictions, and claims settlement practices. The differences are real and can ultimately cost you. Even with the differences listed below customer service, local presence, and the knowledge of an agent can help you be better protected. Is Cheap auto insurance a good buy?
Most auto policies exclude any type of delivery. Think about the number of pizza delivery drivers, Jimmy Johns delivery drivers, newspaper delivery, or even delivery products from Mary Kay or other similar companies.
Rental Cars. One carrier provides loss of use to the rental car company and dimunization of value if the rental car is wreck while in your care. Others don’t provide this coverage and some don’t provide coverage to rental cars at all. What about coverage while driving the loaner vehicle while your car is being repaired?
Policies may exclude any coverage for undisclosed household residents. Have someone living with you that you didn’t put on your insurance policy? When they wreck your vehicle there may be no coverage. What about your son or daughter that temporarily moves back home, did you think to call your agent and add them? I have personally seen claims denied because of this.
- Claims Settlement. I have seen some carriers in a loss depreciate brakes and tires and refusing to put a new tire and brakes on the vehicle citing the betterment exclusion. Some carrier just automatically do this. So depending on the claim, you may have to come up with more out of your pocket than just the deductible. Is that important to know when buying a policy?
These are just a couple of examples of exclusions found in various auto policies. The thing is, more various exclusions like this exist in all auto policies. So is the cheapest insurance the best deal? What if for just a few dollars more you could have had rental car coverage or a better claim setlement? The typical auto policy is 20-50 pages long depending on the print size and I can guarantee you, they don’t all say the same thing.
Recently I saw a policy that was purchased online by a law enforcement officer. The auto policy didn’t include any medical payments or uninsured motorists or underinsured motorists coverage. These are HUGE coverage deficiencies when you have a claim.
So is auto insurance a commodity, or do you need to tell someone what your lifestyle is so they can find you the best value? Why pay for the wrong insurance that doesn’t pay when you have a claim. Typically a better written policy is just slightly more, don’t get bamboozled by slick marketing and a super low rate. If you want to purchase the right policy for your needs contact my office at www.thamsagency.com.