It’s impossible to avoid TV, radio and internet ads for home and auto insurance from companies that want us to leave what we have now and go to them.
Geico boasts, “15 minutes can save you 15% on car insurance;” Liberty Mutual tells us, “Only pay for what you need;” and Farmers suggests they’ll pay even the weirdest, oddest claims, that you can imagine, like birds flying through your windshield.
But just ask Larry Josephs of St. Paul, Minnesota, or Los Angeles-based Carl Sussman about these ads, and each will tell you the same thing: “While they may be technically correct, in reality this type of advertising is deeply misleading.”
Josephs has been in the insurance industry for over 30 years, training agents for major insurance companies. And Sussman—a longtime friend of this column—in addition to running his own insurance brokerage for more than three decades, has served in the Los Angeles County Superior Court as an expert witness on agent service standards issues and brokers.
Both focused attention on several of these advertising claims that will also help businesses, renters and homeowners make more informed choices when purchasing insurance.
Don’t make these mistakes
Joseph: You fall into the interest trap of thinking that shopping for insurance is similar to buying a car and therefore you want the lowest price possible.
Buying insurance coverage that is inadequate for your potential needs leads to financial disaster. The lowest cost percentage usually translates into the worst coverage.
Cause an accident that kills someone and you can lose much of what you have gained in your life. Maintain an unsafe condition in your home or business that results in serious injury, and while your insurance company must protect you, they are not required to pay beyond the limits of the insurance you paid for.
Susman: The fallacy of taking 15 minutes to save $500 is assuming that the variables and coverages will be the same, which in most cases they are not.
Example: The ad will say you will save this much money. But this is based on owning a car other than yours. It is impossible for everyone who views the ad to be at the same risk – the same driving record – and therefore save the same amount of money.
The dangerous consequences of coming across these ads is the belief that all insurance policies are the same and therefore the only thing that matters is the price, coupled with an implied representation that no matter what limits of insurance coverage you have purchased, you will still be protected by personal exposure.
All insurance policies are different and do not provide the same coverage. This comes as a big shock to most people. So it is wrong thinking to assume that you are comparing apples to apples.
Joseph – If it offers medical payments insurance and uninsured/with insurance coverage, refuse to buy it, believing an agent who says, “If you have medical insurance, then you don’t need to buy auto medical payment.”
But one in eight drivers has no insurance. If you get hit by one of these people, your only recourse is your medical payment limits, UM/UIM.
The importance of medical pay is that all passengers in your vehicle are covered. Doctors and health care providers generally prefer to charge car insurance as opposed to private health care. Medical pay costs pennies on the dollar. This is one of the best deals in the world of insurance. If your passengers are injured and the accident is your fault, medical payments will be extremely valuable. Choose high limits!
Susman – “Pay only for what you need!” This suggests that the company will not oversell you (while others will) without answering the important question, “How do I determine what I need?”
Ask yourself, “What is the worst case scenario. What could happen to me?” The insurance agent most likely does not know your personal financial situation and has no legal obligation to ask or offer coverages or limits.
So you need to determine your potential loss and worry about being underinsured. This is where your attorney, accountant, and financial advisor can be of great help.
Is there any benefit to staying with one company?
I asked, “Is there an advantage to staying with an auto, homeowner, or commercial policy for a long time?”
Both Josephs and Sussman strongly believe that staying with a company over the years—provided you’re getting fair rates and have the right coverage—can have real benefits.
“Say your claim is in a gray area where it can be accepted or denied,” notes Sussman, “The carrier is more likely to give you the benefit of the doubt and cover the loss.”
“However, closely related is the advertised implication that your company is doing everything it can to pay extremely unique and outlandish claims when other companies may not.”
“Farmers Insurance does this brilliantly with adverts that feature the weirdest accidents and the closing line is ‘And we’ve got it covered. We know a thing or two because we’ve seen a thing or two.
“But guess what?” he says, “All the other auto and property carriers will cover the loss! They’ve also seen a thing or two.
Dennis Beaver practices law in Bakersfield and welcomes comments and questions from readers, which can be faxed to (661) 323-7993 or emailed to [email protected] Also visit dennisbeaver.com.