A boomerang kid lost his job and moved back home with his parents. While driving his mother’s car, he negligently struck another vehicle, causing several thousand dollars in property damage. The mother’s insurer denied the claim on the basis that the driver’s residency was not reported to the carrier within 30 days of his return home.
15 minutes can save you 15%, anyone?
The boomerang claim denial arose from an exclusion in the insurer’s policy for accidents involving undisclosed household residents, unless the insurer had been notified within 30 days of the residency. What insured would think to report something like this to his or her auto insurer? If an “ISO-standard” policy had been in place, they wouldn’t have to.
At a rapidly accelerating rate via TV advertising, online “ease of use” promotion and proliferating media articles, consumers are being duped into believing that personal lines insurance is a commodity, with the only significant difference being price. Nothing could be further from the truth. While a lower price doesn’t necessarily imply lesser coverage, that is often the case.
In the words of sales legend Morty Seinfeld, “Cheap fabric and dim lighting. That’s how you move merchandise.”
The Myth Perpetuates
The typical “How to Save Money on Car Insurance” article cautions consumers to make sure they compare “apples to apples.” Translation: Make sure you’re getting premium quotes for the same liability, uninsured motorist and medical payments limits and the same physical damage deductibles. It’s as if broad coverage categories, limits and deductibles were the only differences between auto insurance policies.
A Wall Street Journal article, “Car Insurance Rate Shopping Can Pay Off,” says, “The Consumer Federation recommends consumers shop around to get quotes from insurers that don’t use agents, such as Amica Mutual Insurance and USAA (for families with military ties), and then ask an agent to beat the best price.” Not a word about any coverage differences—only the price. How sad…
The Real Story
The differences between auto insurance policies are many, varied and potentially catastrophic. As insurance educator John Eubank, CPCU, ARM, says, “The bitterness of no coverage is remembered long after the sweetness of low price has been forgotten.”
Sadly the marketing focus with these companies is the all-consuming focus on price alone and now the erroneous premise that personal lines insurance has become a commodity, simply because someone says it is and people believe it.
It’s time for independent agents to dispel this destructive myth. This is about preventing catastrophic loss to innocent people who are sold a bill of goods via cute advertising of increasingly stripped-down insurance products that enable low pricing.
SIDEBAR: Don’t Judge a Book…
Here are a dozen auto insurance exclusions or limitations you won’t find in the “ISO-standard” personal auto policy.
- Undisclosed household residents are excluded. How many of your insureds have “boomerang” kids living at home that you’re not aware of?
- Business use of non-owned autos is excluded. Have you ever borrowed a neighbor’s car or made a business stop in a dealer loaner auto?
- Business use of ANY auto is excluded. Do any agency employees ever run to Staples or the post office on agency business?
- Use of ANY non-owned auto is excluded. Better not drive anyone’s car but your own.
- Vehicles over 10,000 pounds in GVW are excluded. Have you ever rented a U-Haul truck or an RV thinking your liability coverage extended to the rental?
- Any type of delivery is excluded. Denied claims include pizza, newspapers, Mary Kay cosmetics and yes, even the delivery of insurance policies to customers by an agency producer.
- Permissive users only get minimum limits. This can apply to people who borrow your car or even unlisted household drivers.
- “Street racing” is excluded. Google “street racing” and see how often people are killed or critically injured in the process.
- Criminal acts are excluded or limits reduced. DUIs or even speeding tickets may preclude coverage.
- Medical payments only include licensed physician fees. One insured incurred a $25,000 “life flight” helicopter fee that would not be covered, even in part, by a policy with this exclusion.
- Theft without evidence of forced entry is excluded. One insured had a four-figure vehicle theft loss denied because he left his keys in the car.
- Sales tax is not covered under loss settlement. This cost one “same coverage” insured more than $2,000 out of pocket for sales tax on a replacement auto.
I couldn't sleep at night if I didn't feel as though I did a thorough review of your insurance, went over coverages and felt I truly had you covered at level you were comfortable with and at the best price we could find. That's our job"-AJaye Brown-Owner of Southern Insurance Associates, LLC
Don't be duped or mislead. Contact Southern Insurance Associates at 706-996-8788 or Info [at] southerninsuranceassociates [dot] com for a real review of your current insurance with options of companies and coverages at a price you can afford. It's insurance that fits.