Insurance can be complicated. My personal opinion is that the insurance industry has made it confusing by promoting everything, even what is most important to most customers and their families. What do YOU think? REALLY need to know? It seems that everything is huge SECRET. This will allow you to de-mystify the jargon, and help you understand it. You are incredibly important.
1. Cheap car insurance is a good idea, right? I’m sure. I’ve seen the same commercials on T.V. You have. Everybody tries to out-shout the other, claiming that they can save hundreds on their car insurance. Although price is important, it doesn’t mean that you get everything. Clients often hear me say that you get what you pay. You would expect to find a pair $5 sunglasses if you were shopping for sunglasses. If they got lost or damaged or didn’t fit right, it would be okay because you already paid $5 for them. You would expect to find a pair of designer prescription sunglasses at your local optometrist’s for $200. It wouldn’t be easy to scratch or break and it would be comfortable to wear. You would expect to leave the shop with something exceptional in value. This is true for car insurance as well as any other product you purchase. You can get a very cheap policy from anyone. This is exactly what you will get.
- Fact. Cheap is just that: Cheap. Before you pay your next insurance bill, it is important to make sure you have the coverage you want at an affordable price.
2. What is the most important coverage I need? – Most States have mandatory, required liability limits for a reason: Promoting Public Goodwill! Your policy’s liability covers you for any medical bills or property damage you may be legally responsible for, if you are found at fault for an accident. These limits were set up in 1970, when healthcare and property costs were much lower than they are today. In 1975, the average annual income was $8,000 – How times have changed… The States have not kept up with the increased healthcare costs or inflation by increasing their liability limits. Have you ever heard of a lawsuit worth less than $1 million? You have between $15,000 and $30,000 to spend on a lawsuit of this size. Where are you going to get the rest? For any property or bodily injury that is caused by a car accident, liability limits range from the minimum requirements of the State to as high as $2 Million. If someone is seriously hurt in a car accident, there could be devastating financial lawsuits against you.
- Fact. Liability is the least expensive coverage on your policy and does the most good for you. You can get substantially more liability protection for as little as $0.99 per day and you can avoid bankruptcy.
3. What is Full Coverage? – “Full Coverage” is not an option. Even if an insurance company offered all the coverage they could, there might still be some things that weren’t covered. This includes illegal activities. Your vehicle’s damage or destruction would not be covered for things like running from police, smuggling illegal substances, or people, or intentional criminal acts. Shirley MacLaine plays the role of Shirley in the 1989 film “Steel Magnolias”. She drives her car into another vehicle that then beats her to a spot at the grocery store. She’s constantly saying, “I have insurance!” Intentional destruction is a crime that can be committed against personal property. This would not be covered by any insurance company that I know.
There are only two types of coverage you can purchase, which are commonly called “Full Coverage”.
Collision coverage is the first of these. If you cause an accident that damages your vehicle, Collision coverage is the only way to get money for repairs. Your Collision Insurance will cover your vehicle if it is damaged by an accident in a No-Fault State like Colorado.
Comprehensive coverage is the second of these coverages, and it protects your vehicle from non-collision related losses like fire, wind, hail, theft, vandalism, falling objects like trees and falling rocks from a hillside, and hitting animals.
These coverages are usually required by banks to protect them financially if you finance a vehicle.
- Tip. If you’re vehicle’s book value is in the low thousands, you may want to seriously consider dropping these coverages. When your vehicle’s actual value is too low to justify paying more for protection, you may want to reconsider. An agent can help determine the vehicle’s value and tell you how much to protect it.
4. Are I covered by my major medical provider, such as Blue Cross/Blue Shield? Do I really need uninsured motorist coverage? – If you are paying someone else for health care coverage, why do you want to give another insurance company more money for the same thing? In most cases where vehicles are covered with Collision and Comprehensive, AND where you have health care coverage for you and your family with a Major Medical provider it doesn’t matter if an uninsured person hits you and hurts you. Your Major Medical provider will cover your medical expenses.
- Note. To make an informed decision about whether or not you should carry Uninsured Motorist coverage, talk to your agent about the actual risk you have right now.
5. I have expensive after-market rims, tires or stereo equipment installed in my vehicle. These items are covered by my policy? Clients spend significant amounts to “customize” their vehicles. Some people spend over $10,000 to get accessories that make their vehicle stand out. This is how you determine if your policy covers these valuables. They are covered if they are in the same place as factory-installed items. Rims and Tires will be installed in the exact same spot as the factory-installed rims and tires. Stereo equipment can be installed in exactly the same location as the factory stereo. However, some accessories such as amplifiers or speakers placed under the seats, in trunk, or in other places are not covered by your auto policy.
- Tip. If you’re adding accessories to your vehicle, ask your agent if they’ll be covered or not.
6. Is my Tom-Tom GPS, cell phone, or radar detector covered if my car is broken into and stolen? – Your policy only covers the vehicle. The vehicle policy does not cover personal property that is stolen from within a vehicle. Only Personal Property policies, such as Homeowners, Renters or Manufactured Homes insurance, will cover personal property in the vehicle.
- Tip. As a general rule, most everything not factory installed in your vehicle is not covered in your car insurance policy. To get the best protection, ask your agent how your vehicle’s property policy is linked to your auto.
7. What can I do to make my claim for an auto insurance immediately denied? – Auto insurance companies all have the same basic set of rules for this they outline in the policy document. Your claim may be denied if you are driving without a driver’s license or with a suspended license; 2) your coverage was lapsed at time of accident; or 3) the policy did not include a newly acquired vehicle within the 30 day period after purchase.
- Tip. Make sure you ask anyone that you allow to drive your vehicle if their license is active and valid, pay your premiums on time, and make sure you add any newly purchased vehicles to your policy as soon as you are able to contact your agent.
8. How much will my insurance company pay to cover my loss if my car is totaled – Generally, most major insurance companies cover your vehicle for its “Actual Cash Value”. Actual Cash Value refers to the actual value of your vehicle as it stands at the time of an accident in which it was destroyed. Each insurance company uses a different method for valuing vehicles. You can get this rate by adding your Kelly Blue Book value for Trade-in, Private Party and to the total. This will give an idea of what the insurance company will pay you for your vehicle if it is totaled. This is the best and worst value you have as an owner of the vehicle. Classic Car policies allow you to insure the vehicle at a Stated Value or an “agreed upon value”. Many personal auto policies don’t allow you to insure vehicles for Stated Valu.
- Tip. Your agent can help you determine the vehicle’s true cash value. Nobody likes to be stuck with a check for total loss.
9. My insurance company will pay for the original manufacturer (OEM) parts if I need them. – In the recent past, many insurance companies guaranteed OEM parts. Many insurance companies assumed that the parts would be easily available when major car manufacturers went bust during the recession. All of the insurance companies changed their policies to address the national shortage of parts for cars made by bankrupt companies. This was to avoid lawsuits. It is now a common practice for aftermarket parts to fix vehicles. They are cheaper and there is no difference in the repairs that most body shops make.
- Fact. Many insurance companies now severely restrict the use OEM parts in repair estimates.
Tip. If you’d like to know what parts are actually being used to repair your vehicle, the best option is to ask your body shop what kind of parts they intend to use for your repair. Consider asking your insurance adjuster if OEM parts are available.10. What happens to my family when I’m killed in an automobile accident? – Most people assume if they are killed in a car wreck that their family will receive some sort of death benefit from the auto insurance company. This is simply false. Some states provide a death benefit for their personal injury protection and medical payments coverages. However, many do not. Only the policy limits of Medical Payments coverage are applicable.
- Fact. You can only get life insurance to ensure your family gets some money if you die in the accident.
Tip. If you have a life or auto insurance policy, some insurance companies may offer discounts. Contact your agent to ensure you get the best deal.
It’s easy to get lost in the maze of insurance. But it’s essential to ask the right questions so that you can make informed decisions about your family. We believe that if you have a genuine consumer advocate to help you understand insurance, you will find our industry more rewarding.
