It’s one of my favorite things to talk about. So much so that I’ve even been a longtime teacher of Project Invest. That’s a program where we go into local high schools in our immediate office area and actually teach students about auto insurance because it’s perhaps the one line of coverage that there is no doubt they are certainly going to deal with at some point in their adult lives.
So let’s get started!
I want to run through a couple of bullet points that bring you an introduction to an auto insurance policy and what you need to understand.
How to Understand Your Coverage
The first thing is how to understand your coverage.
It’s simple. When you talk to an insurance agent, you might hear a constant reference to a “DEC page.” That “DEC page” is actually short for “Declarations page.” And those “Declarations” are Declarations of Coverage.
When you open your policy, typically in the first few pages, you’ll see a Summary sheet. It has the date that your coverage starts, the date that your coverage ends, and things like deductibles, limits of insurance for each line of coverage that you have, and so forth. That’s a DEC page.
And one of the greatest ways to get to know your policy is to take a brief look at your DEC page. And it’s easy because it’s usually only one or two pages long.
What Deductible Should You Choose?
That’s a highly personal question!
Deductibles are your share of a loss in any occurrence of a claim. Typically, the higher the deductible, the lower the premium, because the more you’re going to personally share in that loss.
For instance, let’s say you lose control of your vehicle and crash into a tree. So the accident’s your fault and you have Collision coverage (which covers physical damage to your car caused by a number of perils that stem back to a collision). So if somebody else collides with your car, we’ll deal with that later. But if you’re at fault or you have a situation like a hit & run or something, Collision is what will trigger, or respond, to your loss.
If you have a $500 deductible on Collision and a $5,000 loss, the insurance company will pay $4,500 and you pay the deductible, which is your share of the claim (in this case, $500). The two together make up the $5,000 cost of the damage to your car.
If you want to have a lower deductible, that means that you share less in the claim. Higher deductible means you share more. Traditionally, a lower deductible means a little bit of a higher premium and a higher deductible translates to a little bit of a lower premium.
So it’s all about what you can afford, what’s in your budget, and (at the end of the day) what do you value? What makes sense to you? And agents like those here at Harry Levine Insurance are here to guide you through that process and make sure that you make the right decision for you.
Should You Shop Around?
You need to understand your auto insurance coverage first. And you need a good independent agent who can do that shopping for you.
Many times, an agent is beholden to just one company…and there’s nothing wrong with that. Harry Levine Insurance has its roots as a captive Nationwide agent. But since 2008, we have been an independent agency with a robust set of insurance carriers. (Like all Nationwide agents in Florida, we continue to enjoy a fabulous relationship with Nationwide.)
We work with dozens of insurers to make sure that we have the best option for you. And most importantly, we can shop the market for you. That’s a huge part of the value of an independent agent.
So should you shop around? You should understand your coverage and you should work with your agent to make sure that you have the best policies for you. That may mean, over a period of years, having your auto insurance placed with different companies.
That doesn’t mean calling 20 agents!
What happens then is they very often start stepping on each other’s toes. Many companies do what’s called “blocking the market.” What that means is that, as soon as an agent enters a quote for you, no other agent can get a quote for from that company. So if you call 20 agents, they all rush to the same five or 10 companies that are actively doing business in your marketplace and they wind up not being able to do much for you.
But if you have a strong relationship with an independent insurance agent, like Harry Levine Insurance, we can take your insurance to market for you on your behalf. We can then show you the results and how those 5-10 insurers have you priced as a potential risk for them.
That way, you can make an informed decision that’s also based on coverage, which should always be your #1 concern. Price is very important, but you always want to make sure that you’re properly protecting yourself first and then minding the bank account balance at a close second.
Why Are Some Companies So Much Cheaper Than Others?
There are several answers, the first of which is: not all insurance policies are created equal.
Insurance policies are contracts, and that means the Legal Dept. at each insurance company either took a template or wrote their own contract and they’ve got differences.
Different things are covered, different things are excluded, and—most importantly—very small differences in contract language can have very large implications in a claim payout or a lawsuit if, God forbid, you find yourself sitting in a courtroom.
So the other difference could be that each insurance company has a different risk profile.
“Whoa, what did you just say? That’s lingo, you’re talking ‘insurance-ese’!”
Let me make it really simple. Let’s say we have Insurance Company A and Insurance Company B. Insurance Company A has its clients, and they all pay premiums, so they put their money into a bucket, which we’ll call Bucket A. And those clients either have crashes or they don’t. And Insurance Company A either has to pay out a lot, or they don’t.
The same thing happens with Company B, but let’s assume that Company B is in a town where people are usually a few minutes late to work, they’re rushing around, they’ve got to pick up their kids from childcare on time, things like that. So they get into more accidents.
In this fictional scenario, Company B is set up exactly like Company A from a policy standpoint, but they end up having to pay a lot more in claims. In order to keep their system running, they have to charge more, because they’re paying more out, whereas Company A—who insures mostly retirees who go to the grocery store in the middle of the day but aren’t rushing around during rush hour—doesn’t have to pay out as much, so they can hold their prices lower.
So in a nutshell, you can have contractual differences between insurers or the coverages really aren’t the same. You might see a Comprehensive and Collision deductible or Liability limit or Property Damage limit. But in truth, Company A and Company B might have very different contracts which, when it comes time for a claim, can make a huge difference. Or the demographics of your insurance company simply dictate that they pay more in losses and thus have to charge more. Or the exact opposite, where they don’t pay as much in losses, so they don’t have to charge as much.
How Can You Protect Your Passengers?
“How we can protect passengers in our cars?” is a fabulous question that most people don’t necessarily think of at first.
I like to break Medical Payments coverage down into layman’s terms by calling it “Goodwill Go Away” coverage. You need to reference your policy to know the exact specifics on how MedPay will work for you. However, in general, it’s a coverage that pays, regardless of fault, for people in your vehicle that suffer bodily injuries. There doesn’t need to be litigation. There just needs to be a medical bill, essentially.
So why do I say, “Go Away” coverage? Again, no litigation. It pays regardless of fault. And if somebody’s hurt in an accident in your car, they typically are eligible for that coverage.
Uninsured Motorist (UM) coverage is a little bit more complicated, but it is extremely necessary and important, particularly here in the State of Florida, but really any urban and metro area.
UM can look different in different states and that’s just a simple regulation thing. But in general, what it covers for is if somebody hits you, causes an accident with you, and you or your passengers are injured. Now let’s assume that the person who’s at fault either doesn’t have any insurance or they don’t have enough insurance.
That UM coverage allows you and your passengers to collect from your policy, even though somebody else was at fault for their injuries.
That is critically important, especially in today’s world where it’s estimated that anywhere from 1 in 3 to 1 in 5 drivers don’t have any or enough insurance in many metropolitan areas.
What Protection Does Your Vehicle Actually Need?
Totally subjective question, so call your independent agent (or Harry Levine Insurance) and we can discuss the details with you.
In a nutshell, we want to make sure that your vehicle is protected commensurate with its value. That may mean more or less lines of coverage, higher or lower deductibles, or several other options that we can customize to your car and your lifestyle and you.
What Additional Coverage Should You Consider?
Again, that’s a highly specific question to every individual.
We encourage you to speak with us at Harry Levine Insurance or your other independent insurance agent to go through your options and make sure that you’ve got the best insurance portfolio you can possibly have for you and your lifestyle.
Do You Need Extra Coverage For Work?
That depends on what you do.
If you’re in a situation where you just drive to a job site (just as a contractor) or you’re a real estate professional, there are many situations where all you have to do is make sure that your independent insurance agent (like Harry Levine Insurance) has classified your vehicle as “Business Use.”
It costs a little bit more, but it makes sure that coverage is there if you get in an accident. It’s very important that you do that.
As far as if you need extra coverage for work, now we might also be talking about getting into commercial lines insurance.
For instance, if you have a pickup truck with business signage on it and you’re out and about all day, going from job to job, you probably need commercial business auto insurance. And if you keep that vehicle on a personal auto policy, you may run the risk of a denied claim or several other things that may be nasty surprises should the worst occur.
Do You Need Extra Coverage If You Work For a Ride-Sharing Service?
Whether or not you’re working for Uber, Lyft, Uber Eats, or any of the other wonderful companies in the gig economy, our recommendation is that you talk to your independent insurance agent, like us here at Harry Levine Insurance.
You absolutely will need to make some changes to your policy if you’re working for any of these services. While those gig economy firms do offer some coverage while you’re actively on runs for them, your personal auto insurance does typically exclude Business Use. And working for those companies is Business Use.
So we need to make sure that their coverage and your coverage are working together. And without certain special endorsements (or “riders,” as some people call them) to set your policy up properly, you may be flirting with disaster should an accident occur, no matter what kind of coverage is provided by your ride-sharing or delivery service employer.
Auto Insurance In a Nutshell
Of course, in most states (including Florida), it’s compulsory. That means you have to have it.
That’s a good thing, though! Think about what happens if your car gets damaged or destroyed in terms of your ability (minus of course right now during the coronavirus pandemic when most of us are at home) to get to work? Or even during the pandemic, to get to the grocery store or an essential medical appointment or anything along those lines?
Auto insurance is often misunderstood. And some of that is because of the messaging (even from some of the carriers that we work with and sell product for) that it’s just a commodity. It’s a box off a shelf. And the truth is, it’s not.
Contracts are radically different from carrier to carrier, coverage options can be very different from company to company, and it’s critical that you pull out that DEC page and you at least form a rudimentary understanding of your coverage.
Call your independent insurance agent, like us here at Harry Levine Insurance, and make sure that you have the proper coverage for your vehicle and your lifestyle.
Price is incredibly important. And believe me when I say that we understand, especially in this day and age, how sensitive we all need to be to that. But what it’s really about is making sure that, should the worst occur, you’re gonna have an insurance company there to defend you, pay out as necessary, and do as you expect and want them to do.
All too often—and I’m not saying this is people’s fault, because sometimes insurance companies make mistakes, too—when people feel like their insurance company has failed them, it hearkens back to the decisions they made about coverage in favor of price.
So remember, when you’re dealing with your auto insurance, make sure you understand every bit of coverage on your policy. Talk to your agent about what’s available and why it might or might not be the right option for you. There are a lot of things that may cost just a few dollars more that could save you so much heartache and distress if and when a bad accident occurs.
So remember, call your independent agent, make sure they’re shopping the marketplace for you without flooding the marketplace with quote requests via a number of providers. And make sure that you’re an active participant in your automobile insurance program.
Thanks a lot and don’t forget to hit “Subscribe” to the Harry Levine Insurance YouTube channel.