Automobile Insurance Policy Details Are Fraught With Danger
I enjoyed a great conversation with a nice gentleman the other day. He’d been referred to me for an automobile insurance policy. He readily admitted his last automobile insurance company dropped him back on July 1, 2020, for having two (2) “incidences” during the past three (3) years.
He tried, without success, to acquire new coverage for two (2) months prior to his prior company’s non-renewal date. After many tries, he simply couldn’t understand why no one would take him up as his one accident was not-at-fault and the other incident, a moving violation, resulted only in a ticket, no points.
I ran him through one of my preferred companies and discovered why no one wanted to take him.
How Automobile Insurance Policy Owners Put Themselves In Danger
Auto and home insurance are analogous to term life insurance. Basically your coverage, unlike whole or permanent life insurance, runs out after a certain number of years. If your policy allows the coverage to continue, the premium skyrockets to an amount that becomes untenable to maintain. So you wind up losing your “cheap” insurance, usually at the same time it is most important for your family’s financial well being.
In New York State, auto and home insurance companies write you policies with a term of three (3) years. So, if you maintain a good auto driving record, for example, renewal is a no-brainer. Too many “incidences” though, and renewal may come at a hefty price, or not at all.
So. several years ago you called one of those over-the-phone, direct-to-a licensed advisor automobile insurance companies and got a terrific rate.
You just weren’t aware it could have even been better.
You didn’t know your new policy contained a ticking time bomb.
So you contacted your independent agent or broker who’d been through hell, high water, and even a couple of claims with you, canceled your current policies, and moved to your new company.
Which Rating Factors Matter Most To Automobile Insurance Companies When You Want To Move Your Policy?
How long you’ve been licensed.
Your gender and age.
Your insurance credit score.
How many current moving violations (with some companies, during a period of as many as five (5) years) are on your record when you apply.
Policy lapses for non-payment of premium.
License suspension or revocation.
The length of time you were without auto insurance. Nowadays, the lack of a personally owned auto insurance policy for more than 30 days even if you didn’t actually own a vehicle, will disqualify you from getting insurance from many companies. 1
And Finally, The One Factor Most Consumers Know Nothing About
Few, if any, of the major preferred companies take new business coming from indemnity or non-standard insurance companies.
And that is where your company placed your coverage. Its indemnity or non-standard insurance company. The nice person on the phone never suggested you could request quotes for their Preferred or Standard companies. Or, even if you didn’t qualify for those companies now, you weren’t advised to try again in six (6) or twelve (12) months.
For this reason, you’re basically stuck with your automobile insurance company.
Your Policy Is Emblazoned With An Automobile Insurance Scarlet Letter
For this reason, and this reason alone, I couldn’t offer this gentleman a quote from any of my preferred companies. So, I took the only choice open to me. I gave him a quote from the New York Automobile Insurance Plan (NYAIP). In many cases, the NYAIP is the last resort for those needing automobile insurance.
The NYAIP quote? Close to $6,295 for one year, about $4,500 more than the quote I would have been able to get him from one of my preferred companies.
I called him back.
Told him the quote.
He said, “Forget it,” and hung up.
Why Do Some Automobile Insurance Companies Engage In These Practices?
Short answer? Got me.
For many companies, the name of the game is increasing market share, no matter the immediate cost. So, if your profile permits, you will be placed into their Indemnity or Non-Standard company, offering you a competitive, lower premium just to get your business. Then as claims from other drivers in your Indemnity company roll in, your premium begins to increase. This increase will be imperceptible at first. Then one day, you will open your renewal envelope and receive the shock of your life.
Even if your record is perfectly clean, when you begin calling other insurance companies to secure a lower-cost automobile insurance policy, your current indemnity policy status will prevent you from doing so.
What You Should Do Today
Find your automobile insurance policy and call the insurance company or agent. Ask whether you are in an Indemnity or Non-Standard automobile insurance company. If you are, request they requote your policy for either their preferred or standard company.
Now, when you want to switch companies, it won’t be the type of company preventing you from moving your coverage.
Notes:
1. In my previous post “8 Tips To Save Money On Your Automobile Insurance, (https://brooklyncovered.com/8-tips-to-save-money-on-your-automobile-insurance/)”, I wrote about the good old days when most auto insurance companies allowed you to go from one to up to three years owning a personal auto insurance policy without extra premiums or flat-out rejection. Some companies didn’t even factor in the lack of automobile insurance, as long as you didn’t own a car in your own name. In either case, I suggested the purchase of a monthly zip car membership where your membership automatically provided you with liability insurance coverage. This removed the necessity of maintaining a non-owned auto insurance policy. Thus, when you decided to purchase your own vehicle, the money you’d spent on the zip car membership:
Wound up saving you money on your new auto insurance policy as you’d been continuously insured, and,
Enabled you to qualify for a better or preferred company in an insurance company’s member companies.
Eustace L. Greaves, Jr., LUTCF is an NYS-licensed Independent Insurance Agent and Broker with over 38 years of experience. Eustace is ready to assist you with your life, disability, home, flood, renters, auto, cooperative and condominium, and wedding insurance needs, and can be reached at 718-783-2722, or by email at [email protected]. You can also contact him by going to his website and completing any of the available “Contact Us” forms.
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Have insurance, income tax, real estate, mortgage, or home inspection questions for Eustace? He’ll be happy to provide the insurance and income tax answers and will continue to call on his expert contacts for help in the other areas. Just send him an email to [email protected] with the subject line, “Ask Eustace.”
