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Is all car insurance created equal?

I made the mistake the other day of watching a tv program that wasn’t recorded. This meant I had to sit through the commercials. There are a lot of car insurance commercials out there. And almost all of them promise to save you money. Which got me thinking, does the general public think all insurance policies offer the same protection? Does it matter which insurance company you have? Are there nuances to insurance policies that insurance professionals know about, but that the general public might not be aware of?

I think most people at some time in their life have the looked at their insurance coverage. Some have even tried to understand what is covered by their policy. But the nuances in the policy only seem come up when you have a claim. Let me give you an example. Most of us have had our windshield dinged a time or two. I think that March in New Mexico should be renamed new windshield month. Coverage for damaged windshields is covered by the comprehensive coverage in your policy. Most policies have a deductible for this coverage, typically $500. Most windshields cost less than $500. Now the nuance. Some companies offer windshield replacement with a $0 deductible. Some do not. Which one do you have? It is not always easy to tell by looking at your policy. If you were to call those companies on tv claiming to lower your insurance costs, do you think they ask how your policy responds to the broken windshield? Do you think they ask if you the $0 deductible. My guess is no, they are trying to sell you a lower priced policy.

Another ad I saw showed a woman who’s brand new car had been in an accident and was a total loss. She was complaining her insurance company was only going to give her 3/4 of what her car was worth. She exclaimed, do they expect me to drive around with only 3 tires? The ad is a little misleading and a little self-serving. Here is the nuance again. Some companies offer or provide for new car replacent in the case of a total loss. But this also needs some explaining. The companies that offer new car replacent typically will replace your new car (less than 1 year old) with money to replace it without depreciation. The ad didn’t highlight the fact your car had be less than 1 year old, that it had to have less than 15,000 miles on it and that you were the only owner of the vehicle. And to have this little bonus on your policy, the extra cost involved. So back to our advertisers claiming lower insurance premiums, which coverage do they offer you? New car replacement or depreciated cost?

There are many more nuances that I could go into, but I want to go back and talk about insurance and a total loss to a vehicle. Auto insurance and the “value” of your car do not always meet in a happy place when a car is deemed a total loss. If your car is a deemed a total loss the claims adjuster will try and determine the fair market value for your car at the time of the loss. This is now typically done by the adjuster going into different data bases and looking at cars like yours that are currently for sale or have sold recently in your geographical area. It’s not an exact science since no two cars seem to have the exact same options, trim packages, miles and external condition. They try and come up with a value that will let you go out and buy a similar car. But what insurance can’t replace or compensate you for is the intrinsic value of your car. I know you babied that car, got the oil changed every 3000 miles, kept it in the garage and never drove it over 70 mph. The most common phrase I hear is “I’ll never be able to replace that car”. And your right you won’t be able to replace the car with exactly what you want. That can be frustrating, especially with older cars that folks have had for a while. You know it runs like a champ and starts every time on those cold winter mornings. But insurance can only compensate you for the cold hard steel. It can’t compensate you for what you loved about that car. Sad, but true. And once last nuance. Some car insurance policies have towing and rental car coverage “bundled ” up in their coverage to take care of you while your claim is being settled. Most do not and they are optional coverages. Some agents/companies will ask about the need for this coverage. Some will just want to sell you a cheaper policy.

I know we all want to save money where we can. And I think all of us think we pay too much for car insurance. But don’t think that all insurance policies and all insurance companies are created equal. As an insurance professional, I can tell you they are not. Make sure you are working with someone who wants you to know all of your insurance options, not just sell you a cheaper insurance policy.

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