ask an insurance expert: the insurance non-bs thread

didn’t find one in a search, so i thought i’d create one.

i work in the insurance industry directly for a major company, and have experience in sales, claims and underwriting, and in several different lines of insurance. most people who pay for insurance have no idea how it works or if they have the right coverages and options. i figured a thread where insurance professionals give out unofficial advice could be of use. remember to always verify information directly with your insurance company/agent.

 

My pet peeve: Why do insurance companies want my SS number? I see no relation between credit rating and driving habits. Are there insurance companies that do not use it?

 

depends on the company and state. but yes, your credit worthiness can be a rating factor. insurance companies don’t use a fico score, but rather an insurance score and it’s not hard inquiry. there is a proven correlation between credit worthiness and responsibility. however, they will/can still pull a credit report without your ssn. a lot of companies will also let you request a new pull if you feel your credit history has improved. this can result in a lower rate.

other rating factors people don’t like - marital status and highest level of education.

 

What are options or higher coverage amounts that we as consumers don't necessarily need so that we may lower our premiums?

 

What makes this thread "official"?

 

very subjective depending on many factors, which are different for everyone.

general coverages available in most states.

*** liability - pays out to other people you hit. “split limits” separate bi (bodily injury) and pd (property damage). csl (combined single limit) combines them into one limit.

split limits = bi per person / bi per accident / pd. example - 100/300/100. bi is $100k per person, $300k per accident and pd is $100k per accident.

csl = $500k csl. this pays up to $500k per accident regardless how much of it was for bi and how much for pd. csl coverage usually costs more.

do you need it? yes, if you want to drive legally. you want enough to cover your assets in case you cause an accident. you don’t want to be sued and have a lien put on your assets or your wages garnished, licenses suspended, etc.

*** um/uim bi = uninsured/underinsured bodily injury. this pays for you and your passengers if you are hit by someone who is uninsured or underinsured. this is not available in every state.

the limits can be written exactly the same as liability.

do you need it? in some states, yes it’s required. in other states it’s optional and in some states both are not available. in states where it’s optional, it’s good to have if you don’t have health insurance or your health insurance won’t pay for injuries sustained in an auto accident.

*** medical payments, pip (personal injury protection), etc. pays for medical expenses and additional benefits if you or your passengers are injured, regardless of who caused the accident.

coverages are usually fixed amounts - $15k, $35k, $50k, etc. the limits will vary from state to state.

do you need it? in some states it’s required and in others it’s optional. just like with um/uim you don’t really need these if you have health insurance that pays for injuries sustained in an auto accident. however, these coverages can pay for additional things like funeral expenses, lost wages, etc.

vehicle coverages.

*** um pd = uninsured property damage. this now pays for your vehicle if you are hit by someone who is uninsured.

coverages are fixed amounts and there can be deductibles.

*** collision = you’re in an accident.
*** comprehensive = fire, theft, vandalism, weather related, *glass damage*, you hit an animal

if you want these coverages you have to choose a deductible. this is how much you pay out of pocket before we (your insurance company) will pay the rest. lower deductible means higher insurance price.

do you need it? yes, in most cases if you are financing or leasing the vehicle. the lien holder may even have a maximum amount they’ll let you chose for the deductible ($500 or $1000). once you own the vehicle outright, you can decide if you want these coverages. some people just get comprehensive if they hardly ever drive their vehicle.

*** rental car reimbursement. this applies if you need to rent a car because yours was in an accident. does not apply if you go on vacation!

you can choose how much per day you want your insurance company to pay. you’ll typically have options like $30/day, $40/day, $50/day, etc.

do you need it? no.

*** roadside assistance. general includes towing and any roadside services - lockout, jump start, out of gas, etc.

do you need it? no, but it can sometimes only cost $1 per month.

*** loan or lease payoff. this is the same as gap insurance from the dealership.

applies if your vehicle is totaled or stolen and you’re upside down on the loan.

do you need it? not required but good to have if you’re upside down on your loan or you lease.

 

so those are the basic coverages on auto policies. they’re the same on other lines of insurance line motorcycle, boat and motor home.

one coverage to especially pay attention to is liability. this does need to be tailored to you. if you own a home or other assets, start in the 100/300/100 range. if you don’t have assets but want to be a little more responsible than most people, stay in the 50/100/50 range. if you want the cheapest insurance and don’t care about yourself and other drivers on the road, stick with state minimum.

 

"coverages are usually fixed amounts - $15k, $35k, $50k, etc. the limits will vary from state to state."

Double all those amounts for me. I wonder if I should drop them down to what you have listed here and would that even make a difference on my premiums.

 

yes it would lower your premium, but not always by a lot. i personally don’t tell people to get pip or medical payments if they have good or decent health insurance. the only other advantage to having those coverages, is they do pay for your passengers as well.

 

Why are some collector car insurance companies so picky on the cars they'll cover ???

 

Well those amounts are on three vehicles each. In other words, double what you said X3. So it might pay to lower them on each vehicle.

 

it’s all about risk! what’s the value? how expensive is it to fix? what’s the likelihood it will be in an accident? what are you using it for? basically if you could cost your insurance company more money, your premium will be higher, or they may chose not to insure you or your vehicle.

total loss payout - standard personal auto policies are acv (actual cash value) which takes depreciation into consideration. collector policies are agreed amount. you agreed to a specific amount to be paid out in the event of a total loss, no matter what. this is much more risky for an insurance company and can cost them a lot of money.

 

you might be thinking of something else or you’re not reading your coverages correctly.

liability is set for the whole policy and covers the drivers that are on the policy.

um/uim, pip, med pay are set for the whole policy and cover people in your insured vehicle(s).

vehicle coverages are set per vehicle.

some insurance companies breakdown all coverages next to each vehicle and some divide them as i outlined them. just because you see them next to each vehicle, that doesn’t mean you’re paying extra per vehicle.

 

Ok, thanks.

 

First and foremost OP, thanks for doing this. It’s always important to understand what we’re paying for. I’m fortunate enough to have an agent that does a great job in that regard, and seems to be honest.

However, I developed a real disdain for the insurance industry as a whole during the “Great Recession”. Fortunately again, none of this applied directly to me, but I saw so many people get absolutely screwed for years, through no real fault of their own. Here’s the worst example:
I have a neighbor that lost his job in April of 2009, and his wife lost hers in June of 2009. Both of them had found new jobs by October of the same year, but at 30% less total income. They totally exhausted their savings. Never had an insurance claim. Never missed a payment, declared bankruptcy, lost their house, etc. They were able to sell some things to cover the expenses and lost wages, but their debt-to-income ratios changed heavily to much higher than normal, which impacted their credit scores. This impact caused their auto and home insurance to sky rocket by 25%. Didn’t matter who they called, the quotes always came back much higher. They’ve only within the last couple of years been able to get back where they were in 2008.

I spent many evenings talking with him about this, and basically being his sounding board. I was convinced they’d did something wrong, but found out this was a fairly common occurrence at that time. To me, this is borderline criminal, and full-on immoral. Since then, I’ve considered the insurance business to be on the same level as used cars and lawyers.

 

And now our health insurance is doing the same things.

 

Agreed! Worst part is, there’s no good way to fix any of it really. Costs and prices are out of this world on nearly everything, and with society being as litigious as it is, going without insurance isn’t an option financially (and legally for many things). There are 2 industries that truly control the world, because they command most of the money...Insurance and Advertising.

 

Yep. I can't even afford the wheelchair I need. I have a $6000 deductible. The wheel chair I need for everyday use starts at around $1000. And that is a cheap one. So I keep buying these Amazon "specials" and they last about a year before crap starts breaking on them. So I fix them with crap from Ace Hardware but that is just a bandaide that buys me about another 4 months. And I start the process all over again.

 

My employer and my wife’s employer are both heavily pushing the “high deductible” health plans, with little or no kick-in for an HSA. So far, both are keeping the more traditional plans at inflated premiums, which we’re going stay with as long as we can. I fully expect those options to be gone within a couple of years, and everyone will get pushed to those “money saving” high deductible plans. I feel for you bro.

 

Thanks. The SOB's would just soon as let you die as to provide you with decent health insurance.