Often auto insurance feels like a rip-off; paying huge premiums to protect ourselves in case of an accident and when the claim time comes costumers are often treated like criminals and given the run around. Auto insurance is mandatory in pretty much all states and provinces in North America and insurance agents and brokers are making large sums in commission, but do they really tell us everything we need to know? Some time ago we discussed 10 things your broker won’t tell you, is your insurance agent/broker any different? The answer not really. What’s in your best interest conflicts with what is in their best interest and in the world of survival of the fittest they have to put their interests ahead of yours.
I Don’t Provide a Free Service – I am Getting a Large Commission
Insurance agents/brokers are salespeople; their primary job is to bring new business to the company by selling you a policy. For every policy they sell they receive commission, which can range from 15-20%, or even higher on the first year. Commissions will depend on the product and additional riders sold. This is just first year commission, as long as you keep renewing the policy the agent/broker will continue to receive commission (although often at a reduced rate the then the initial). Next time you renew your policy keep this in mind.
Your Rate Won’t Drop Next Year
When was the last time your premiums dropped? Unless you are a new driver or had an accident recently, your premiums are not likely to drop. In fact, they probably will increase. Agents/brokers will often give the impression that the premium will likely drop in the future however lower premiums will remain a fantasy for a long time to come.
Credit Issues? You’ll Have to Pay for It
If you have bad credit it’ll not only cost you when borrowing money, but it will cost you in insurance premiums as well. Insurers take into account your past credit history when setting your premiums and the lower your score the more it may cost you. This has been a controversial issue in the past few years and the Ontario government has recently changed this and starting September 1st 2010 insurers can no longer factor credit history or other economical factors in their premiums. Other states and provinces may follow in the future. However, unfortunately for now bad credit history = higher premiums.
Your Car is Totaled, but We Won’t Pay the Full Value
Your insurance company is your best friend when you set up a policy and pay premiums, come claim time it will be hard to find them. They will try to low-ball you whenever possible. If your car is totaled chances are very slim that you will get the full value for it. Don’t accept your company’s first offer, instead find comparable vehicles through AutoTrader or other services and provide that to your insurance company.
We Like Declaring Your Car Total Loss
Your insurance company is very likely to declare your vehicle a total loss even though it may very well be repairable. The reason is that they can often get away with giving you much less than the value of the car and in turn sell it back at a profit. Even it the company declares your car a total loss you can opt to purchase it back from them.
No Such Thing as Loyalty Discount
Loyalty does not mean much to your insurance company. It does not really make any difference if you have been with them for 1 year or 25 years, everyone is rated the same. Although you may receive a few freebies if you have been with them for a while (such as $0 deductible) your base rate will stay the same. If you do receive any discounts rest assured it is not because they consider you loyal, it is mainly because they can reclassify you and put you in a different rating group.
Have to Make a Large Claim? Or Too Many Small Claims? We Will Try to Drop You
Insurance carriers do not like to make payouts. If there are large payouts or frequent small claims the insurance company will not be too happy. Even if the accidents were not your fault, they consider you “unprofitable” (yes clients are either profitable or unprofitable) and may look for ways to drop you. One strategy is asking you for a completed application before renewal.
Even If We Don’t Make a Payout, It is Still a Claim
The insurance company does not have to make a payout for it to be considered a claim, even if the claim is below your deductible it will count as a claim and show on your record.
I am Not as Competent as I Pretend to Be
As it may be clear by now, insurance agents/brokers are sales people and most of them do not fully understand insurance – they pretend to know. An hour on the internet can be much more valuable then asking your agent/broker about your policy.
Have we missed anything else?