Promises, Promises

By Chelle Cordero

October 3, 2014 5 min read

Automobile insurance is often expensive, confusing and, in most cases, very necessary. There are a few states that do not mandate vehicle insurance; however, even these states require financial responsibility and require you to pay for costs of bodily injury or property damage resulting from a car accident you caused. Some states also provide the option of paying an uninsured motorist fee, which will help to pay some expenses should you be hurt in an accident with an uninsured driver.

The cost of insurance, or the risk involved in not having any, usually makes an unwelcome dent in your budget. Knowing this, it is easy to be seduced by promises of lower rates, discounts and easier decisions about your insurance coverage. And with promises of saving money in just a few minutes, it's almost impossible to resist. Before deciding on any insurance policy, exercise due diligence to know exactly for what you are signing on.

In our busy world, it's easy to want answers quickly, but when we settle for instant quotes or comparisons, we may very well be cheating ourselves. Insurance companies need to consider several variables -- your age, kind of car, driving record, credit record, where you live, whether you drive to work or for pleasure and how many miles you put on yearly -- before they can offer you a truly customized policy with the coverage you need.

If you are switching insurance companies, sit with the agent to compare coverage amounts in order to see if you are really getting the same or more for less money, or if you are sacrificing valuable protection. Going over your policy with your agent is a good idea even if you are just renewing; your needs may have changed since the policy was written.

Safe driver discounts, vanishing deductibles and accident forgiveness sound terrific and will often work in your favor. However, safe driver discounts are often not up-front savings. Some companies offer plug-in modules, which record your driving habits over a period of months and if the insurance company deems you are a safe driver, they may apply a discount to your next renewal.

Accident forgiveness and vanishing deductibles are not as magnanimous as they sound. Many policies offer these options if your driving record qualifies and only after you apply for a premium (more expensive) policy. Also, accident forgiveness and vanishing deductible are one-shot deals (within a specified time period) and offer no guarantee that the company won't drop you when your policy comes up for renewal if you have cost the insurance company too much money.

In insurance jargon, replacement value, book value, fair trade and actual cash value may be very different amounts. Verify what your policy lists as your coverage if your car is totaled in an accident; a totaled car is one where the cost of repair is greater than its value. You may have to present the insurance company with proof of the value of equivalent cars in your region to get a relatively fair evaluation and reimbursement.

Multiple car discounts and bundling are often authentic ways to save money. Many people don't realize that, in most cases, drivers do not need to be family members to qualify for multiple car discounts, but they do need to reside at the same address or household. You should be careful that all of the insured drivers are responsible and pay their bills on time. Otherwise, everyone on that policy can be adversely affected, which may impact future policies. Bundling is the same concept as purchasing items in bulk to save money; when concurrent claims are made on bundled policies, insurance companies will often require only one deductible be fulfilled (this may vary based on insurance adjustments).

Despite the cautions above, insurance companies are not out to rip you off. However, they are for-profit businesses. If you feel you've been treated unfairly, you can check with your state's insurance department to verify regulations your insurance company should be following, how to rectify (attempt to) errors and where to file complaints.

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