How To Shop For Auto Insurance

How To Shop For Automobile Insurance in California

The Disclaimer

This is not intended to be a primer on automobile insurance. It is not Insurance 101. I do not recommend coverage nor do I go into deep detail describing the available coverage. In order for me to do that we would need to write a bigger book (which would probably not be read anyway) and I am more concerned with writing more of a booklet that will not overwhelm the reader. I do not recommend agents, brokers, or companies and I do not name those agents, brokers, or companies with what I would call questionable selling practices. In fact I am the sole opinion on what I think are questionable selling practices. This is intended to help level the playing field for those shopping for automobile insurance, especially those with a couple of citations and/or accidents on their driving records as they seem to be more at risk in having their hard earned dollars taken from them. It is hoped that I can help you ask the correct questions and become aware of some of the “tricks” of the trade used by some agent/brokers. On the other hand this is not a booklet designed to help you cheat the insurance agent/broker or company (and there are ways that you can). I have just as much dislike for those kinds of shoppers as I do for those on the provider side of the fence that stretch the rules. The suggestions are not all inclusive but hopefully I will give you some ideas that will more than pay for the cost of this booklet. The suggestions are mine and are just that. . .suggestions! Remember the final decision concerning the purchase of automobile insurance remains with you the buyer. Good luck in your shopping efforts!

 FOREWORD

I have always wanted to write a book. When I was younger and had younger children, I envisioned that someday I would write a series of children’s books that would rival the Hardy Boys and Nancy Drew. As I grew older I thought maybe I would write a sports novel or inspirational book. I now find my dream reduced to writing a small booklet designed to help people purchase automobile insurance. Though this will never become a Readers Digest Condensed Books book (probably because it is already condensed) or a threat to displace the latest Tom Clancy novel on the best sellers list, I hope it does at a minimum serve its intended purpose. And what might you ask is that? I hope to help you make an informed choice when selecting whom you are going to do business with when obtaining automobile insurance especially if you are saddled with a few tickets or accidents. During my thirty plus years of selling automobile insurance I have seen changes in the industry. Most of them have been positive but some of them troubling, especially in the area of selling automobile insurance. One such change in California is that there is no longer much difference between being an Insurance Agent and an Insurance Broker. To the consumer this is not a big deal but it needs to be mentioned because throughout the booklet we refer to these representatives as Agent/Broker. Insurance Companies have usually been viewed as the villains of the industry (this is not necessarily true but they can write their own booklet to dispute their image) but their agents were viewed as honest and trust worthy. Unfortunately in recent times the relationship between the agent/broker and the customer has become more adversarial. There are many reasons for this change. Some are legitimate reasons while others are due to misinformation that I will not go into, as this is not a “soapbox” booklet. One legitimate reason for distrust between the consumer and the agent/broker is the pressure placed on the agent/broker to make a sale. In order to make a sale it is necessary to get the potential customer face to face in either the agent/broker’s office or the customer’s home. Increased competition in the automobile insurance industry has resulted in some agencies engaging in what I would call “questionable” quoting tactics that are designed to get the appointment. So before you make that first phone call, please take the time to read the information that follows. I hope you find this booklet informative and enjoyable. If it helps you save even a little bit then it was well worth the effort.

BEWARE OF THE DREADED BROKER FEE

You heard it here first! Any automobile insurance shopper that does not ask about potential Brokers Fees could be making a very serious and expensive mistake. What is a Broker’s Fee? It is a separate charge made by the agent/broker (although technically it is suppose to be a Broker only) in order to obtain added compensation in addition to any commission due from the company. In the “good old days” of selling automobile insurance the agent/broker could make a commission of up to 20% of the premium. Out of this the agent/broker would pay his rent; advertising, and other overhead expenses and still make a pretty good living. The agent/broker would have to complete an application and then the company would do all the other necessary underwriting and then issue the policy. Most insurance agents were local business people serving their local communities. Times have changed. There are now more insurance companies in California vying for the automobile insurance dollar. This has resulted in the increased number of statewide automobile insurance agencies. The local agent selling just automobile insurance is quickly becoming a thing of the past because they just cannot compete. The agent/broker is required to perform duties that were once left to the company. Most insurance agencies are required to become automated and are usually connected to the company’s computer system in one way or another. The company used to have the expense of inputting the client information but now most of the agent/broker’s are required to input the information directly into the company information systems. Despite the increased workload and therefore higher overhead expenses, the companies have generally reduced the agent/brokers commissions. Historically reasonable Broker Fees have been intended to help offset the cost of doing business in times of reduced premiums and reduced commissions. The amount charged for a Broker Fee can vary from agency to agency. Some agencies do not charge a Brokers Fee while others charge“whatever they feel they can get away with”. In most cases the Broker Fee is used to help offset the overhead expenses but in some instances it is used as compensation to the agent/broker placing the business or recycled to purchase more advertising in which case it can be costly. If asked I believe most agencies that charge a Broker Fee would indicate that they believe their fee to be reasonable and in most cases they probably are. However it is important that they are disclosed to you especially if the same company is being offered by another agency. It is entirely possible that both Agency A & Agency B represent the same insurance company and are therefore offering you an identical rate except for the Broker Fee. If you know what the fee is with both agencies you may be able to save money by either allowing the agency with the lower fee to write the business. If you want to place the insurance with the agency with the higher fee give them the chance to reduce their fee. This might be preferable if the agency with the higher fee is actually closer to the area in which you live Once you have determined the fee make sure to ask what “services” are included for the fee. Sometimes the initial fee covers the application only and does not allow for servicing of the policy (i.e. Policy endorsements, claims handling, etc.). In any event the Agent/Broker is required to have you acknowledge the Broker Fee at the time of application. Be sure you understand the form, as the Fee is usually nonrefundable and fully earned. Am I suggesting that you deal only with agencies that do not charge a Brokers Fee? Absolutely not. If an agency is charging a Broker Fee and is still competitive then good for them! I am simply making you aware that all Broker Fees are not alike and could make a big difference in the amount you pay for your automobile insurance

SO YOUR RECORDS NOT PERFECT!

 In many households the amount of disposable income spent on automobile insurance is second only to the house or rent payment yet it has been my experience that not enough effort is made to truly shop around for the best combination of coverage and price. Too much emphasis is placed on “how much down and how much a month”. If that is your main interest you may find yourself greatly disappointed when it’s time to file a claim only to find you did not have the coverage you thought you were purchasing. If you are a Proposition 103 Good Driver you may still be able to learn a little bit to help you shop for automobile insurance but this booklet is especially designed for those with less then perfect driving records because that is where the greatest variance of insurance premiums are. Simply put a Good Driver as defined by Proposition 103 is anyone who has at least three continuous years of driving experience and no more than one moving violation or one non-injury accident. Those of you that qualify are in the drivers seat (pardon the pun) when it comes to purchasing automobile insurance. The ability for an insurance company to refuse to write your coverage is extremely limited and you are able to be much more selective in who you are doing business with. If you do not fit the above profile then you are the buyer that needs to become aware and for whom this booklet is written. Insurance companies are allowed more latitude and are not required to offer you insurance at all if you do not meet their underwriting criteria. So the trick is finding a company willing to offer you insurance and at a rated you hopefully can afford. You need to shop because your premiums (price of insurance) could range as much as $2000 or more. Notice it says range. That is not the actual premium but the difference in price for the same coverage with the same driving record. With fees thrown in (see Beware of the Dreaded Brokers Fee) your range could increase by another few hundred dollars. It has always puzzled me as to why a prospective customer would be unwilling to be better prepared to shop for insurance. I guess they think the more information they provide the more likely it is that the company will raise the price. This could not be further from the truth. If you provide as much information as possible at the time of obtaining a quote the agent/broker is more likely to able to do a better job of comparison shopping on your behalf. This is the age of huge databases. Most of all the companies have access to information concerning accidents even if they do not appear on your Motor Vehicle Record (MVR). Therefore it is important that you disclose any accidents and/or citations you have to the agent/broker when you are trying to get a quote. The reason is two-fold. First it will allow them to obtain an accurate quote based on the correct information. Second should you fail to disclose and the company finds out they can cancel for “Material Misrepresentation” and you may find yourself rewriting the policy with a different company and having to repay any fees that were collected. When shopping for a rate you need to beware of an agent/broker that does not ask about your vehicle as to whether it is salvaged, lifted or lowered, turbo charged or a four-wheel drive. Beware of an agent/broker who does not ask about the details of your accident or does not ask about the kind of citations you have. Beware of an agent/broker who does not ask about the type of occupation you have or how you will be using the vehicle. These and other questions will need to be asked at the time of application and can make a difference in your rate.

COMPARE APPLES TO APPLES

What is full coverage? First of all, there is no such coverage. Yet this term gets more and more people ripped off than any two words in the automobile insurance business. Never, ever, never, ever use the term full coverage when asking for a quote! Some of the coverage’s that may be available are Liability, Uninsured Motorist, Uninsured Motorist Property Damage, Medical Payments, Comprehensive, Collision, Towing, Rental Car Coverage, and the list goes on. Most agencies that quote “full coverage” include only Liability, Comprehensive, and Collision. Other agencies may include Uninsured Motorist and Medical Payments along with the Liability, Comprehensive, and Collision Coverage as part of their “Full Coverage” package.