9 Things Your Insurance Agent Won’t Tell You

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?

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Comments

  1. says

    the fact is most of the time you will never ever need insurance. this is a fact many people go a life time an don’t ever use their insurance provider.

    But the cold hard fact is when that accident happens you want to be confident that you will be taken care of so be sure to get insurance and keep a positive relationship with your agent so you know they have your back.

  2. says

    Okay so granted you’ve made some good points here. I am an agent, and I can speak honestly that you are right on many levels. Many agents do add on unnecessary coverages to put more money in their bank. It is understandable because we really aren’t making a high commission-commissions have gone down over the years-and many agents are struggling just to hit even. That’s why consumers need to educate themselves to see what they need without blindly following their agents advice.

    As for the loyalty discount, sorry to say but some companies will give an added discount the longer you stay with them. What is really important is that you keep your insurance coverage without any lapses, or you lose the prior insurance discount.

    Lol, you do have a point about incompetant agents. It only takes a 40 hour course and passing a test to become an agent so truth be told you gotta watch out. The best way to test an agents knowledge is to ask them lots of questions. If they don’t know all the answers (say they are starting out) at least be sure they are resourceful and can find them for you. It’s vital that you work with an agent that is trustworthy, and make sure they actually have an agents license. I have seen many offices that have people acting as agents under the owners license, when the owner is never there. They are really just sales people and will not be able to consult you on your policies.
    Hint: to find out if they are an agent, get their name and look it up on your states department of insurance website. I know in GA you can look up any agent and see all of their qualifications.

  3. says

    *Oh I will note that the 40 hour course and test is applicable to GA only, other states have different requirements.

  4. Mack says

    This is half truths and generalizations at best. Also when you say that agents make comissions, do you want them to work for free? I am an Agent. How would I pay my mortgage or put diapers on my kids if I didn’t make a comission (my job is 100% comission btw). Insurance is a commodity, it’s manditory and as a broker/agent I work FOR my customers to find them the best rate possible. Discounts are given for loyalty. ALSO, there are MANY, MANY factors that cause insurance to DROP. I re-shop each of my clients every year 6 weeks from re-newal. About 35% of the time I find them a better rate with someone else or find more discounts they qualify for with their current insurer. This article carries some good points, but is lopside and stinks of bias. Just looking at the “Collision” side of things is kinda a joke, every auto policy sold comes with a certain amount of “liability” insurance, usually between 500k-2million depending on state/provincial laws. What would you do (if you didnt have insurance) and you t-boned someone and put them in a wheel chair for life. Would you just shell out your million? Then just do that. Sorry if I sound rude or pretencious or whatever…. Its just hard to read articles that are biased and not shed some preverbial light on the subject. Now lets see and equally biased article (to the positive) of 10 things insurance covers your butt on.

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