Since the Covid-19 health crisis hit our shores earlier this year, I've been busy "quoting" auto insurance in response to a significant increase in demand for that product. For an insurance agent, that's good news, especially in light of the challenges in many parts of our economy. The bad news, is that people are shopping strictly for price. The vast majority of people I’ve spoken to over the past 4 months are either unaware of the type and scale of coverage they really need or are simply not interested. I understand the need to save money and right now, anxiety levels are high with regard to financial matters. To take the pressure off, people are understandably working on managing their budget.
What I try to explain to current & potential clients is that there are three times in the life cycle of an insurance contract … once at policy inception, again at renewal and lastly, at the time of loss, where savings or loss can occur. At policy inception and at renewal, its as simple as getting the lowest available premium and there are a number of ways to do that. First, choose a company that has a favorable rating plan for your particular rating factors (i.e. garaging location). Second, make sure the policy is rated accurately and that you are getting all of the discounts you may be entitled to (i.e Accident Prevention Course). Third, if you buy less coverage, you’re rate will be lower no matter what the other rating factors might be and this is where the potential trouble lies.
For example, a customer with minimum liability limits (in NY 25/50) will have the “relative” lowest price, yet if they are involved in an accident that is their fault and a judgement served against them, they could be on the hook for tens of thousands of dollars. An oversimplified example; if your Bodily Injury limits are 25/50 and the judgement is for $100K, the maximum amount that the insurer will pay on your behalf is $50K. The other $50K comes out of your assets and income. Again, an oversimplification, but you get the idea. Saving a few hundred now, can cost you many thousands later and will be life changing; and not in a good way.
I’m all for saving money, but my professional advice, is don’t do it blindly. Know what you are risking when you select every line of coverage in every insurance policy. Make an informed decision based on your risk tolerance and your budget. Have your agent review each policy and each line of coverage with you to help you make the right choices. Don’t look at insurance as just another bill, look at it as your “safety net”. How big and how strong do you need that net to be ? Know it, don’t guess at it. In the long run, you’ll be happy you did.