You and the Law When shopping for insurance, don’t make these mistakes

It is impossible to avoid ads on television, radio and the internet for home and auto insurance from companies wanting us to drop who we now have and come to them.

Geico boasts, “15 minutes could save you 15% on car insurance,” Liberty Mutual tells us to “only pay for what you need,” and Farmers suggests they will pay even the strangest, oddball claims imaginable, such as birds flying through your windshield.

Just ask Larry Josephs of Saint Paul Minnesota or Los Angeles-based Karl Susman about the ads and each will tell you the same thing: “While they might be technically correct, in reality, this type of advertising is deeply misleading.”

Josephs has been in the insurance field for more than 30 years, training agents for major insurance companies. And Susman — a longtime friend of this column — in addition to running his own insurance brokerage for over three decades, serves the Los Angeles County Superior Court as an expert witness in agents and brokers’ standard of care issues.

Both focused a spotlight on several of these advertising claims that will also help businesses, renters and homeowners make better-informed choices when buying insurance.

Don’t make these mistakes

Josephs: Falling for the “Rate Trap,” thinking that shopping for insurance is akin to buying a car and therefore, you want the lowest price possible.

Buying insurance coverage that is inadequate for your potential needs invites financial disaster. The lowest cost rate generally translates into the worst coverages.

Cause an accident that kills someone and you can lose much of what you have acquired over a lifetime. Maintain a dangerous condition at your home or business that leads to serious injury, and while your insurance company must defend you, it is not required to pay beyond the limits of the insurance you paid for.

Susman: The fallacy of spending 15 minutes to save $500 is assuming that the variables and coverages will be the same, which in most instances they are not.

Example: The ad will say you will save this much money. But it is based on owning a different car than yours. It is impossible that everyone watching the commercial has the same risk exposure — the same driving record — and therefore would save the same amount of money.

The dangerous consequence of falling for these ads is believing all insurance policies are alike and therefore the only thing that matters is price, combined with an implied representation that no matter what limits of insurance coverage you have purchased, still, you will be protected from personal exposure.

Insurance policies are all different and do not provide the same coverages. This comes as a big shock to most people. So it is flawed thinking to assume you are comparing apples to apples.

Josephs: If offered medical payments insurance and uninsured/under insurance coverages, refuse to buy it, believing an agent who says, “If you have medical insurance, then you do not need to purchase auto med pay.”

But one in eight drivers has no insurance. If you are hit by one of these people, your only recourse are your limits of med pay, UM/UIM.

The importance of med pay is that all occupants in your vehicle are covered. Physicians and health care providers, in general, prefer to bill auto insurance as opposed to private health care. Med pay costs pennies on the dollar. It is one of the best bargains in the world of insurance. If your occupants are hurt and the accident is your fault, med pay will be tremendously valuable. Opt for high limits!

Susman: “Only Pay for What You Need!” This suggests the company will not over-sell you (while others will!) without answering the important question, “How do I determine what I need?”

Ask yourself, “What is the worst-case scenario. What can happen to me?” The insurance agent most likely does not know your personal financial situation and has no legal obligation of inquiring or suggesting coverages or limits!

So you need to determine your potential loss and be concerned about being underinsured. This is where your attorney, accountant and financial advisor can be of great help.

Benefits of remaining with one company?

I asked, “Is there an advantage in remaining with an auto, homeowners or commercial policy for a long time?”

Both Josephs and Susman strongly believe that by remaining with a company over the years — provided you are being charged fair rates and have the right coverage — can have a real benefit.

“Say your claim is in a gray area, where it could be accepted or rejected,” Susman notes, “The carrier is more likely to give you the benefit of the doubt and cover the loss.”

“However, closely related is the advertised implication that your company does everything possible to pay extremely unique and odd claims when other companies might not.

“Farmers Insurance does this brilliantly with commercials that present the most bizarre accidents, and the closing line is, ‘And we covered it. We know a thing or two because we’ve seen a thing or two.’

“But guess what?” he says with an impish grin, “All other auto, and property carriers would cover the loss! They’ve also seen a thing or two.”

Dennis Beaver practices law in Bakersfield and welcomes comments and questions from readers, which may be faxed to 661-323-7993, or emailed to [email protected]. Also, visit dennisbeaver.com.