Yes, if you have the right coverage
The topic of discussion today is around an often ignored or misunderstood coverage called “Comprehensive” coverage. When most people associate “full coverage” to their policy they are often referencing having Comprehensive and Collision on their vehicle. Depending on the context, “Full coverage” in the insurance world is a zero dollar deductible policy with comprehensive and collision coverage. Where most people today consider full coverage simply having comprehensive and collision with a deductible.
Since having comprehensive and collision is a condition of almost all auto loans, clients are forced to carry these coverages at an increased cost. Once the vehicle is paid off, many clients eagerly call their insurance provider or agent and have those coverages removed.
Here is why removing comprehensive coverage might be a bad idea!
Auto insurance policies insure the vehicle for its actual cash value, or the value to purchase the same vehicle in a similar condition. If a client owns a BMW M3 and pays off the vehicle at the end of the five-year note, that vehicle may still hold 20,000 to 30,000 in value! Removing comprehensive and collision might save a few hundred dollars/year but puts the risk of having the vehicle uninsured.
If a client is still adamant about removing collision, we will fight tooth and nail to keep comprehensive coverage.
What is comprehensive coverage?
Comprehensive coverage is a named peril coverage that protects against
- Theft
- Vandalism, fire, riots, and explosion
- Missles (rock or falling objects)
- Storm damage, such as hail or wind
- Earthquake
- Lighting
- Animal damage
Often referred to as OTC, or other than collision, comprehensive coverage is very inexpensive and is very specific to these particular perils. In recent years, wind/hail has become more and more common. With people often parking their vehicles outside, theft, vandalism, storm damage, animal, lighting, and flood are all at greater exposure.
I can’t tell you how many times clients tell me that they would run outside in the middle of a hail storm to try to save their vehicle.
First- do not go outside during a hail storm. Fixing people is far more complicated and expensive.
Second- if you have a policy with TWG, it is likely that you have comprehensive coverage on your vehicle anyways.
In my 10 years of adjusting, people constantly undervalue comprehensive and often get hostile when they find out they don’t have said coverage, especially when they find it out it runs a $20 dollars/6 month period.
Less coverage doesn’t mean more value.
Be mindful when trying to reduce your premium by cutting coverages with your insurance provider. Many captive insurance agents will offer policy reviews, and then offer lower coverages as a way to appease their client in order to keep them one or two more years. The problem with that is that the economy of scale does not work in favor of the client when you do this. It would be far wiser to shop around every few years than to cut your coverage in half for 5-10 dollars/month.
If you have not had your policy reviewed by an independent broker, now has never been a better time.
Many insurance companies like to position their agents as “trusted advisors” while offering one company insurance policy. I could never understand how a professional could advise on products they don’t or can not sell. Since we are not captive to a single company, not only are we exposed to more policy forms, but we do not have a conflict of interest when it comes to placing business with our carriers. We do not have to sacrifice coverage to stay price competitive, we simply market our other carriers.
