Every day we get bombarded with advertisements telling us that we can save hundreds of dollars with some company’s cheap insurance. How do they offer less expensive coverage?
They have catchy jingles, humorous commercials, spotless websites, and they’re all offering bargain auto insurance. How can you really be paying less for the same thing? Well, that’s just it—you aren’t buying the same thing. It’s cheap insurance for a reason. Here’s how they do it:
When quoting insurance online, there is little to no guidance given. When applying for coverage, you’ll typically be asked what your current coverage is, and that’s what they’ll quote. There won’t be a review for coverage gaps or increased liability exposure. They won’t discuss strategies to best cover you while maintaining an affordable premium. It’s simply an apples-to-apples comparison of what you’re paying now versus what you could pay with them. Their focus is solely on price, while an Independent Agency has various insurance carriers and the experience to find the overall best value for your situation.
Most companies’ biggest expense is its employees. If you want to talk to a person about your coverage, you’ll most likely be dealing with call centers. Establishing a relationship with your insurer is hard when you talk to a new person every time you call in. And all of the things you could count on an agency for (new proofs of insurance, endorsements, billing) is now done by yourself online or through a call center.
Coverage from an insurer that is only focused about getting you the ‘best price’ has to cut corners somehow. Removing the agent and using call centers is one way. In addition to this, there are often large policy differences by your ‘cut-rate’ insurers. Many have policy language that drops your liability coverage to your state’s bare minimum if someone else is driving your car, which could be very dangerous! (Nebraska’s DMV website warns drivers that the state minimum limits don't adequately cover your exposure while driving!) Similarly, others will only pay a certain percentage of the claim if someone else is driving. Some cut-rate insurers offer Comprehensive and Collision insurance, but they cover far fewer perils than a standard policy. An example is that even though you may have your car insured for Collision, if someone else is driving, your Collision coverage won’t pay. Others may have separate deductibles for glass claims and body/engine claims. Some may not pay for cosmetic damages, and the list goes on…
Come claim time, you can run into some sneaky provisions on the settlement. Your cut-rate insurer may have understaffed adjusters, and the adjusters may be trained to only pay the absolute bare-minimum (You can usually find claim ratings online). Then when an amount is agreed upon, you might not see that money for a few months. Another scenario you might face is a limited coverage for repairs—your cut-rate insurer might only pay to replace the most necessary parts to make your car operable again, and they will probably only reimburse you for the Actual Cash Value/depreciated amount. That leaves you with an out-of-pocket expense that a standard insurer would have covered. Another version of this is some cut-rate insurers will only pay to have your car repaired with used parts. Lastly, some of these shifty insurers sneak a provision limiting the number of miles you are insured for. The limit varies, but as soon as you go an inch over that last mile, you instantly become completely uninsured.
With some companies, you may not even have the option to buy Uninsured/Underinsured Motorist coverage. Some companies don’t offer coverage for towing expenses. Others don’t cover Punitive Damages, and others don’t provide Medical Payments. It all varies, but a standard insurer would cover all of those.
What Does it Matter to You?
Insurance is not a commodity, but a service. To us at Copple Insurance Agency, insurance is a promise. Don’t be fooled by cut-rate insurers. Just think about it—they have be making money to stay in business, so if they’re offering cheaper rates, there must be a catch! That catch could be any combination of things, such as more exclusions, fewer coverages, terrible service, denied claims, and more.