2/24/2015 11:00 AM

Don't Believe Everything in Insurance Commercials

“I heard it on T.V. so I know it’s true.”

Auto insurance commercials are notorious for promising cheap insurance, or promising you can save money by getting state minimum liability.  

I immediately see three major issues with this.  First, automobile insurance is based on so many different rating factors that there would be no guarantee of cheap prices for everyone.  The vehicle you drive, the age of your drivers, driving records, and even where you live can affect price.  I imagine people would be just as insulted if someone with a terrible driving record paid the same as someone with a perfect record for the same coverage.

Second, many companies make policies cheaper by cutting out coverages to create a bare-bone policy with little protection.  Typically, this means the companies change their fine print.  This could mean adding an exclusion that takes away coverage typical on a standard form.  

When it comes to homeowners insurance policies, one way companies save money is by creating crazy deductibles.  If you call around for quotes, watch for the percentage deductibles.  Five or ten percent of coverage A for the dwelling may sound good, but can end up be thousands of dollars!  It’s much better to set an affordable deductible ahead of time.   

When it comes to auto insurance, companies trying to give you the lowest price will cut out your most important coverages.  Uninsured motorist, underinsured motorist and medical coverages are all part of the policy to protect you and those in your vehicle.  In fact, to give up uninsured and underinsured motorist coverage, you have to sign that you refuse coverage.

Uninsured motorist coverage protects you from a driver who has no insurance.  If they hit you and are at fault, your insurance will still provide coverage for you.  Underinsured motorist coverage protects from those out there carrying the legal limit, or state minimum limits.  Your coverage provides for you when the other party’s coverage runs out.  So if you have $75,000 worth of injuries, and the person who hit you carries $25,000 per person coverage, you would be at a loss for the rest if you don’t carry higher limits of underinsured motorist coverage.

Medical coverage provides for medical costs for those injured in your vehicle.  

Finally, state minimum levels do not offer enough protection.  Here in Indiana, the state minimum limits are $25,000 per person, $50,000 per accident, $10,000 property damage.

Imagine you slide on an icy road, running into another vehicle.   This vehicle has 3 passengers, all badly injured and taken to the hospital in an ambulance.  On top of that, you just hit a new Porsche.   With the state minimum liability, your insurance could potentially pay $25,000 for the first injured person, $25,000 for the second, and nothing for the third.  While it sounds like a lot of money at first, for a serious injury $25,000 will not go far.  $50,000 split among however many people are injured in the car at the time of the accident is not much.  Imagine you hit a family of 5 and all were injured.

The $10,000 property damage would come into play for the vehicle you damaged.  When repairing a broken bumper on a vehicle can cost at least $1,000, imagine how much serious damage could be done to a nice car.  If the new vehicle you hit was just totaled, $10,000 would not be near enough to replace it. When your insurance couldn’t pay, the other party would come after you and your assets.

Higher liability limits for your auto insurance are always available, and liability is the cheaper part of the policy.  Going for cheap rates tends to mean you skimp out on coverage to protect yourself, your assets and your future.  Saving a little today could mean losing out to a large, unaffordable lawsuit in the future.

My rule of thumb, the more it’s advertised, the less you should trust it.  Don’t take major life advice from commercials.  They’re intention is to sell you something, not to help inform you.

If you have questions on how to choose the right insurance company or coverage, give your independent insurance agent a call.  We’re always here to help.Ph



Photo: “my neighborhood” by woodleywonderworks. 19 Oct. 2008. Flikr. CC BY 2.0.
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