Understanding Auto Insurance

It is a known fact that everyone wants to save money, so wanting to save money on car insurance is a no brainer.   However, if you are thinking of going on line to buy auto insurance and you have no understanding of what you are buying, how will you know you are getting what you are paying for?    

You've heard and seen all the advertising from Geico, State Farm,  Progressive, All State, AARP, Hartford, Farm Bureau, and all the other various Auto Insurance Companies doing business in your area and on the web.  Most of these companies want you to believe that all auto insurance policies are the same, so that your only concern is finding the lowest premium.   

How wrong can one be?    There are thousands of Auto insurance companies.   It would be a miracle if any of the them provided identical coverage to  another company and here is a dirty little secret that I bet you did not know. What do the agents and companies not have to tell you about the policies they sell?  More on this later

 Understanding Auto Insurance will reveal that secret to you and then arm you with enough information so that you will be able determine if the secret applies to you.  Then you will not be at the mercy of the agent who knows you don't know how to evaluate a policy.  It is when you don't know how to evaluate a policy that you get sucked into buying the lowest premium policy.  

 The question then must come up, is it a good policy?    

If you are like most people, when you get your auto policy you will toss it in a file and never look at it again.  I have never met someone who said they actually read their policy.   Usually policies are read by their attorney who has been retained to determine if there is coverage after the insurance company has denied the claim.  Most buyers rely on the agent to explain the coverages to them and believe they are covered as good as everyone else and since you believe all policies are the same what difference will it make?  At least that is what the one line marketing companies want you to believe.  So the question comes up again, when would you like to know how good your polciy is?   Before or after an accident?  

    

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All of the pictures are shown to call your attention to accidents that most people would look to an Insurance Company for payment of a claim.    Sometimes it is only the vehicle involved, sometimes there is  a second vehicle involved, and sometimes other people's property is damaged.  There are almost always people involved.   We wished none were involved but more than likely someone was. Whether anyone was injured or not is not revealed, but you need to  know one thing,  if you were involved in any of the accidents shown, how would your insurance claim be handled and would you be made whole financially?

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So to emphasize, let me restate this.  The majority of the insured car owners will never  have a major or unusual accident.  They will never need to know the difference between a really good  policy and a rather not so good policy.     This difference may significant to a small  percentage of drivers but that difference could be minor or very major.   Below is an example of one of the more minor differences.

Let's pretend you just bought a used car.  It is beautiful and you are very proud of it.   You take it home and shine it up and it looks almost show room condition.  You drive it to work the next morning and park it towards the back of the lot to keep it away from the rest of the crowd.  About 10:00 A.M. you become aware that there have been sirens kind of close to your building.  Soon someone comes in and says that a car in the parking lot is on fire.   You ask them where it is parked.   In just a few seconds you realize they are talking about your new purchase.  

You rush outside to your car and find firemen trying to figure out how to get under the hood which is almost obscured with smoke.    You unlock the door to reach inside to find the  hood release.     The hood is opened and black  smoke rolls out.   A couple of empty extinguishers later and the smoke stops.  In a few minutes the firemen are studying the engine compartment and it is pointed out that the wiring harness is the source of the smoke.  They state they have not seen any flames nor has any one else.  

You call the dealer where you bought the car and they make arrangements for them to come and get the car.   After a couple of hours or so, the Dealer calls and confirms that the wiring harness was indeed the cause.  There are a few other components that have been scorched but it appears that the wiring harness suffered major damage and will have to be replaced along with the battery.  The total cost to repair is estimated to be about $2500.

You contact your insurance company and turn in a loss.  The adjuster goes to the shop where your car is  located.   He examines the damage.   He looks for evidence of flames.  There are none.   The next day he calls and tells you that although he has talked to everyone and has examined the car very carefully, there just is no evidence of flames.   He also states that the policy you have defines fire as an occurance that generates flames and since there have been no flames the damages to your car will not be covered.   You are aghast.

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Three of the four pictures shown above represent huge losses of personal property.  The evidence that the accidents were traumatic is very evident.   Accidents happen so fast that most people, if they are injured but survive, cannot keep up mentally with the event.  I have taken loss reports from people who were not injured and they could not remember things leading up to it. 

  The car in the lower right hand corner is just for fun.  It is a great example of a really neat vehicle.   I want one.

 So the question is, what should one absolutely not do after an accident?

   Download a free chapter of the book to find out.  

Then drill this information into everyone of the drivers you love.  

You know there is something wrong.  You have never heard of an Insurance company not covering fire to a car.   You call the agent and question her about this claim denial.   She agrees that the policy does state that  unless there are flames there is no fire damage.  It is the way fire is defined in the policy.    You ask her if she was aware of this information before she wrote the policy on your vehicle.  She says that she has never had it come up before so she had no reason to know that it was not covered.  

You are angry.  You call a mechanic friend of yours and ask if there would have been any symptoms that the dealer should have been aware of prior to this happening which would have made it possible for them to  be able to predict that the damage would occur.   The mechanic tells your that there are  no warnings before these things happen.  The insulation on wiring harnesses can wear thin over time but not cause a problem.  However, the next time it is driven the worn area will break through and come into contact with metal.  It happens gradually over time but finally the  exposure is great enough that allows more current to flow through the wire than it is designed for.    This is called a dead short and the wires will continue to glow red like the wires in a toaster. This will continue until the wires either melt off or the battery goes dead.  The shorted wire will cause damage to any adjacent wires it is touching and any other components the hot wires come in contact with.  It is usually a nasty looking mess.     But, in the grand scheme of things a rather minor loss unless it happens to you.  

  So here is the question that you need to ask yourself.   If your car's wiring harness did  the same thing as pointed out in this event, would your auto insurance company pay for the loss?   How will you find out?    There are two ways:  the first;  read the policy.   Yes I know it will take some time and patience.   The second way;   ask the agent who sold you the policy.

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  There is a little known secret in the insurance business.  

An agent does not have to tell you everything he or she knows.   The agents is responsible  for revealing  information covering the basic coverages and then it falls on the agent to answer thruthfully every question that is asked of him or her.   If the agent doesn't know, they must state so, and then, if  it is important to the buyer, the buyer must ask the agent to find out and respond.  

If you ask a question the answer should be provided to you in one of two ways;   1. a letter from an Officer of the Company stating that the coverage is included or excluded.  ( An alert agent will never state in writing there is coverage, if they do, they may end up paying  for the loss themselves.)  or 2.  have the agent point out the verbiage in the policy language that provides the coverage.   If the verbiage is there, ask the follow-up question;  is there someplace in the policy that the coverage is taken away?   

The problem surfaces when companies do not provide coverages that  are expected.  The Companies do not have to tell you they have not provided the coverage, it is up to you to ask if the coverage is provided.

If you have not studied an auto policy and understand what coverages are important, who will tell you?  How will you find out? This book is  a compilation of reasons why buying on line or over the phone is often not a good idea.  However, having said that, regardless of who you buy from, you need to educate yourself as to the reasons why certain coverages are important.

  

Included at the end of the book are a  list of questions that you should ask the agent when you are reviewing your auto policy or should be answered by the new agent from whom you are seeking a quote.   Ask every agent the same questions and record the answers  The answers may be technical in nature, but if an agent cannot provide an understandable answer in straight talk find a new agent.  

  Agents work for you and the good ones will help you understand your policy to get your business.   However, if the first words out of your mouth is" I want the cheapest insurance I can find,"  you have laid the framework of what may be a big rip off.   Since all companies are not the same, the agent's only obligation is to sell you a policy that has been approved by the Insurance Commissioner in your State and remember he/she does not have to tell you everything they know.    

The statement "You get what you pay for,"  certainly comes to mind when discussing this.  It is fine to try to save money on insurance, but you should know what you are giving up to get that lower premium.  Remember, if one company covers something and another does not, you are going to self insure for that uncovered risk.  Self insuring can save you some money, as long as you know what the risk is;  that is how much can you lose if the loss happens, how frequently can the loss happen, and how much will it cost to insure the risk.

This book only covers insurance that is sold in tort liability states.

  This book does not explain no fault insurance.