These days it’s hard to turn on the TV without seeing a gecko or Flo trying to convince you that car insurance is all about one thing: price.
According to SNL Financial, GEICO spent $1.18 billion on advertising in 2013. And Progressive spent $595.4 million that same year. Combined, the two direct insurance writers spent $1.77 billion dollars in an effort to convince an entire generation that insurance is just a commodity. And that it doesn’t really matter who you buy insurance from as long as you get the lowest price.
But many people still remain unconvinced that price is all that matters with insurance. Especially those who have had to file a claim in the past.
So in this post I want to confront the question: do you really get what you pay for when it comes to auto insurance or is price the most important thing to consider?
If you’ve never filed a claim or it’s been a long time since you have then it’s understandable that when you think about your insurance the only thing that comes to mind is your monthly bill. And that’s one reason why the “price is all that matters” message has resonated with so many people.
However, insurance serves an important purpose. It’s a way for individuals, families and businesses to manage risk by transferring it to someone else. Without insurance, an accident or disaster could wipe out everything you’ve worked so hard to build. It could mean years of hard work gone in an instant.
And I’m not saying this to try and strike fear into you. It’s just reality that we don’t know what the future holds. You don’t know if you’ll experience an accident tomorrow, next year or 10 years from now. If you knew then you wouldn’t need insurance at all.
So the first thing to remember is that insurance is not just a bill you pay every month. It’s a tool to help you protect the assets you’ve worked so hard to acquire. It’s there to protect you from the potentially devastating effects of a major accident or disaster.
Now, let me be more specific and ask you some direct questions in case you think I’m being too philosophical here. These might be questions that Flo and the gecko “forgot” to ask you.
Many people don’t realize their car insurance is missing this coverage until it’s too late and they’re scrambling to find a way to get around after their car is getting repaired. So make sure if you do “name your price” that your price includes rental car coverage at a level that’s appropriate for you. The last thing you want to deal with after being in an accident is trying to figure out how to get around or how to pay for a rental car out of your own pocket.
In an effort to save money on car insurance, many people neglect to pay attention to the part of their policy that explains which type of parts the insurance company will pay for in the event of an accident. Your policy may promise that your vehicle will be repaired with original equipment manufacturer (OEM) parts or generic parts.
So you have to ask yourself: are you OK with using parts from the junkyard (aka “generic parts”) to repair your vehicle or would you rather know your vehicle was repaired under the safest conditions using OEM parts?
As more and more people are persuaded by the “price is all that matters” message the risk of being hit by someone with a “bare bones” policy, a policy with the lowest limits allowed, increases.
Remember, you may be a safe driver. But it doesn’t matter how safe you are when a teenage driver rear ends you because she was more concerned about reading a text message than with driving. And what if she believed Flo and bought car insurance by naming her own price; a price that only included the state minimum liability limits, of say of $15k of liability per person. This means if your damages are $30k then her insurance company has no obligation to pay you anything after $15k.
And if you also carried state-minimum-limits then the only recourse you have is to sue. But what if she has no money? Well, then you’re out of luck and that $15k will have to come out of your own pocket. All because you wanted to save a few bucks a month on your car insurance.
Hopefully, you can see that basing your car insurance solely on price is like gambling with your car insurance. And I find it ironic to gamble with your car insurance since, remember, the purpose of insurance is to manage risk by transferring it to another party (the insurance company) not to retain more of it.
Furthermore, there are many ways to lower your rate without sacrificing important coverages that open you up to unnecessary risks. This is one of the benefits of working with an experienced independent insurance agent instead of spending “15 minutes or less” online filling out an automated form.
An agent can also spend 15 minutes with you to determine your unique situation and ask questions that will allow them to make a recommendation that’s best for you. So the choice is yours. Are you going to get advice from a talking gecko or Flo or from a professional independent insurance agent who can recommend coverages best suited for you?