Are all insurance companies created equal?

Surprisingly, the answer is no. It is easy to get caught up in the advertising gimmicks only to find out otherwise when you have a claim. What one needs to do to adequately protect themselves is to read the contract. That’s right; the policy between the insurance company and yourself is a contract. Not all contracts are created equal.

One common mistake that happens frequently is you might have just saved 10% but did you check your policy declarations page? The declaration page(s) spells out exactly what your coverage is. That 10% savings you are so excited about might be for less or no coverage. For example, your auto coverage with carrier A had limits of $100,000 per person for bodily injury, $300,000 per accident for bodily injury and $100,000 for property damage. You chose carrier B to save money but now your new limits are $50,000 per person for bodily injury, $100,000 per accident for bodily injury and $50,000 for property damage. It is very common to receive a quote that doesn’t compare coverage amounts. Some companies quote the minimum coverage amounts for your state unless you specifically ask otherwise. In addition, you will want to check your declarations page to make sure the deductibles and other features like towing or glass coverage are listed correctly otherwise you could be out-of-pocket at the time of claim. Furthermore, make sure you understand the premium they are quoting you is for either a 6 month term or a 12 month term. All too often we hear I am saving so much money, when in actuality your 12 month policy term went to a 6 month. So if you pay, for example, $600 every 6 months for your auto then you are actually paying $1,200 per year. Might not be a savings at all when you were originally paying $1,000 per year.

Another example is OEM, an abbreviation for Original Equipment Manufacturer. Not all carriers offer OEM, some might only offer “aftermarket” parts. What’s the difference? OEM are parts made by the car manufacturer, like Toyota or Ford, whereas “aftermarket” parts are manufactured by a company other than the car manufacturer. Some companies may offer OEM for an additional premium if you specifically ask while others may automatically include that coverage. Again, the way to find out what is exactly covered is to read the contract. Being proactive will help save you money, time and a headache instead of finding out at the time of claim.

The marketing gimmick lately has been for new car replacement. The advertisements make it seem that if you are insured with the company that advertises that coverage, you automatically have it. Not true! What they don’t tell you is that it is an optional coverage with restrictions. For example, Travelers will replace your new vehicle with a brand new vehicle of the same make and model if yours is totaled in the first five years of ownership. To purchase the coverage, the vehicle must be less than five years old and the customer is the original owner. Farmers Insurance will replace your vehicle with a brand-new one if it is a total loss and if your vehicle isn’t available in the same make and model, Farmers will replace it with a newer one. To purchase the coverage, the vehicle must be insured with Farmers when the car was purchased and be less than 2 years old or have less than 24,000 miles on it. There are other carriers that offer this coverage for an additional premium and as you can see, each has their own rules. Just another example of why it is important to read the insurance contract to make sure your insurance needs and expectations are being met.