It’s Your Business
- Author: Terry Greenhut, Business Editor
- Subject Matter: Tools for the excellent manager
- Issue: Insurance
The Management Series
If you want to have some fun or wind up with a splitting headache, shop around for insurance. If you think new-car salespeople confuse and frustrate you, you haven’t seen any kind of razzle-dazzle ‘till you shop for insurance. Whether it be for business, homeowners or automotive the game is afoot as soon as you go onto any website and ask for an insurance quote of any kind.
Apparently, there is no privacy whatsoever for you once you put your name, email address, phone number and, God forbid, your Social Security number on any insurance company or broker’s website. Within 24 hours of asking for a quote you will be emailed and called by almost every other insurance company, broker or comparison service that operates on the internet. That in itself might not be a bad thing if you want multiple quotes, and you should; but what is bad is that for the next six months you will be haunted with a multitude of phone messages and emails even from salespeople whom you’ve told that you already bought the insurance and not to bother you anymore.
The next concern, which to me is very important, is the quality, integrity, and financial security of the company you choose. Has it been around a long time, does it have a good reputation for paying claims in an honest and timely manner, is it highly rated by the Better Business Bureau and by the insurance commissions in the states in which it operates? Will it raise your rate if you have a claim? Will it guarantee a rate for a specific amount of time if you have no incidents?
Insurance companies raise rates whenever they can. It is rare that they lower them for any reason. They do however play games with what they call discounts; like for example if your car has daytime running lights or a passive alarm system or any other equipment that might help it protect itself. Their latest game is to have you install a device in your vehicle that monitors your driving habits for several months to determine how many miles you drive, at what speeds, whether you take off or brake too quickly and so forth. They tell you it’s to see if you qualify for additional discounts, but I believe it’s to see if they can gather evidence to use against you if you are involved in an accident or if they want an excuse to raise your rates. When you shop for auto insurance the companies that offer these devices always ask if you want to accept it. I say “no” because I think my privacy has been assaulted way too much these days and I don’t trust them to do what they say they will.
Now for the one coverage that will drive the price of your auto insurance higher than any other and that is “Uninsured” or “Underinsured Motorist.” Typical of the way things are in the world these days, people who work hard and pay their own bills are being forced to pay for those who can’t, don’t or won’t and this is a prime example. We buy liability insurance so that if we hurt anyone or their property through our own negligence or mistakes our insurance will cover most if not all of the costs involved. Many of us even take out “umbrella” policies for several million dollars in excess coverage if we have a lot of our own assets to protect should we somehow cause catastrophic damage and get sued for more than the limits of our liability insurance.
In order to even purchase an umbrella policy, we have to have a certain amount of underlying liability insurance, usually at least $100/$300 thousand. If another driver causes us damage in an accident it is expected that his liability insurance will pay for our damage or injuries. It will if the other driver has liability insurance but only up to the limit of his policy. After that you would need to sue to try to get the rest of what you are owed directly from the person who caused the accident. If the other driver has no insurance, you would have to sue for the entire amount. While there is no doubt that you would win the lawsuit, collecting your money would be a whole different challenge. People who drive without proper insurance usually are the ones who don’t have money or assets, which would add up to what you would win in the suit, so you may never collect.
Uninsured or underinsured motorist coverage is supposed to pay you immediately for your injuries up to the limit of your policy’s uninsured motorist coverage. You have to determine the amount of coverage you want but the insurance companies recommend you take an amount similar to your liability coverage. Note that the more you take the higher the premium will be.
Automobile liability insurance is mandatory in most states, so you would think that almost every vehicle going down the road is covered because if it weren’t these states would rescind the registrations and force the owners to turn in their license plates. Sounds good in theory but enforcement isn’t great. When policies expire or are voided for non-payment, insurance companies notify the Department of Motor Vehicles who then sends out a notice to the offender to either secure new insurance or turn in their plates. The time lag for all these notices and paperwork can be anywhere from days to weeks to months. Meanwhile the car is being driven with no insurance. A recent estimate of the number of uninsured or underinsured motorists there are in the state of Florida, where I live, is 25%, so one out of four of the vehicles that can cause me damage is not insured and a higher percentage are underinsured.
While it’s good that many states require liability coverage what’s bad is that the amount they require isn’t anywhere near enough to cover a serious crash; typically $10/$20 thousand. That’s peanuts in today’s world.
There has been an ongoing debate as to whether we need to buy Uninsured Motorist coverage. The fact is that if you have good medical insurance it will pay for your hospitalization if you are hurt no matter who hits you, and if you have collision insurance on your car it will get fixed or replaced as well. If you don’t have those types of coverages, then you would probably want the Uninsured Motorist insurance.
If you do have those coverages the only other reasons to buy the Uninsured Motorist coverage is to protect any of your passengers who might not have their own medical coverage or the fact that the damage to your vehicle and other structures caused by the uninsured party will be paid without your rates being increased for a chargeable accident.
The rate for Uninsured Motorist coverage of course varies with the amount of coverage you want, but you can’t buy an amount higher than your liability limits. In some states the additional premium is chump change but here in good old “Demolition Derby” Florida it can be almost as much as your liability, which keeps a lot of people from buying it. It isn’t mandatory to have it here like it is in some states; it’s just smart if you don’t have adequate medical coverage for yourself and your passengers.
I find it interesting that so many of the TV and radio commercials that we see and hear every day are for auto insurance. I think GEICO and Liberty Mutual must be buying time really cheap because you are inundated with their commercials whenever you watch or listen to anything on the airwaves. They, like all the others, say that they can save you money if you go with them. Of course, they don’t say specifically how much or over what period of time. You have to find that out for yourself after doing your own comparison shopping. I did and found that neither one of them had the lowest rates of the long-established and reputable companies from whom I received quotes. Maybe if they advertised a little less they could afford to lower their rates somewhat.
When you shop be certain that you are comparing apples with apples. For example, the liability coverage that I carry is $300,000/$500,000 but none of the sites I visited offered that exact coverage. The highest they went was $250,000/$500,000; so you can’t exactly compare unless you call and ask if they have the precise coverage you want and for what price. Also note that if you want to purchase an umbrella policy to cover you should someone sue for more than your liability covers the companies that issue those policies generally require you to have at least $100,000/$300,000 in underlying liability insurance.
I know you must be waiting for the punchline to this story so here it is. I had my auto insurance with a company that advertises that it caters to people in the armed forces and veterans, which would be great except that their rate it turns out is higher than all of the others I investigated. I called to see if they were interested in keeping my business by cranking in some discounts based on my driving record and the number of years I’d been with them, but they weren’t. The only thing they would do to lower it would be for me to take much higher deductibles which I wasn’t about to do, and even that wasn’t going to amount to much of a savings.
I eventually did find a well-established company that gave me a rate that I could live with and actually better coverage than I had. Besides that, the woman I dealt with at the agency knew all the right answers, was friendly and professional, and made me feel that I would be well taken care of should I ever have to file a claim. I couldn’t ask for more than that.
So, having dealt with my auto insurance situation the next and even tougher one will be my homeowners, which I’m going to tackle next. It’s interesting that the property taxes here are about 1/3 of what they were in New York but the homeowner’s insurance can be as much as triple due to the hurricane risk. We’ll see what hoops I’ll have to jump through and what happens next.