You just had an accident and your insurance company declares your car a total loss. The car is five years old, has low mileage and is in excellent condition. Even so, the insurance company offers you only a faction of the value you think the car is worth, and definitely not enough to replace it with a comparable vehicle. This financial shock has faced more than one owner as ever more insurers use very aggressive depreciation formulas in determining a vehicle’s value.
Perhaps, the insurer agrees to repair the vehicle, but will pay only for “generic” replacement parts from third-party manufacturers often located third-world countries like Taiwan, Thailand or China. The result is a substandard repair, and a depreciated value that will cost you at trade-in time, especially if it is high-end, luxury model. Or you find that rental reimbursement the insurer will only cover the rental of a minimal economy car when you need a large sedan, SUV, or minivan, or are just used to driving a Mercedes, Cadillac or Lexus.
Like any commodity, you get what you pay for when you are shopping for insurance and often the few dollars saved by buying a “low cost” policy doesn’t make up for a low claim payment if you have an accident or the vehicle is stolen. Atlantic Mutual, an insurer that caterers to affluent consumers with substantial assets to protect, provides a list of questions you should ask when shopping for automobile insurance or if you are considering changing carriers.
Motorists, especially more senior ones should carefully consider changing insurance companies, especially if they have an incident-free record with a company over a long period of. A new carrier, and especially a very cost conscious one, may pay a claim but cancel coverage for a “seasoned” driver. Then, finding another insurer who will cover you may be difficult, expensive and coverage may be limited.
Atlantic Mutual suggests you ask the following questions:- Will the policy cover replacement parts from the original manufacturer? Some policies will only pay for “generic” auto parts from third-party manufacturers. The quality of these parts may be substandard compared OEM (original equipment manufacturer) parts. Policies designed more for the affluent market will pay for parts produced by the original manufacturer.
- How much will I be reimbursed if my car is “totaled”? Ask about adding an “agreed value” (or “stated value”) clause to your policy. This feature enables you to set the value of your auto before I becomes a total loss.
- Will the cost of renting a comparable car be covered? Low-price insurance policies may come with per-day and total spending limits that barely pay for briefly renting an economy car. Since repairing or replacing your auto could take weeks, consider policies with limits that will allow you to rent a comparable car for an extended period.
- What quality of claims service can I expect? Even companies selling low-price policies promise to deliver excellent claims service, so it’s best to seek a second opinion apart from the company’s website or advertising. Ask an independent agent or check with your state’s insurance department. Some states provide information about the number of legitimate complaints lodged against auto insurance companies.
- Will the policy cover the full cost of repair at my favorite auto shop? Some companies may force you to take the price set by their repair shops, which might not meet your quality standard.
- How high are the liability limits in the policy? When you compare the price of policies, make sure you are comparing policies with the same liability limits, including those for uninsured motorists. While many states set minimum liability levels, those limits may not be advisable for affluent customers, who make lucrative targets for lawsuits. Choosing a low price policy with low liability limits can put much of your net worth at risk.
- Will I be reimbursed for overnight expenses if my car breaks down far from home? Standard industry policies do not cover the cost of overnight accommodations, meals, and phone calls to rearrange your plans.
- Will I get lower rates if I don’t make any claims for several years? Many companies give discounts to drivers with no accidents or moving violations for five years. The size of the discounts may vary, however, so be sure to ask what benefit you can expect.
- Will I get a break if the same company insures my home? Most companies offer discounts when they have your home and auto policies -- just ask how much.
