One insurance myth we want to dispel is that all policies are alike, the difference only being the price. The most common thing we hear is “I was talking to my neighbor and HIS insurance policy <insert something here> but MY insurance policy…” Here’s the deal: Insurance policies are legal contracts and, aside from some industry standards, each policy is unique. Some insurance companies cover far more or less than others. Geico’s auto policy and Liberty Mutual’s auto policy, put side by side, will have vastly different definitions, coverages, exclusions, and so on.
Some auto policies don’t cover “non-owned autos.” Have you ever driven someone else’s car?
Some auto policies do not cover business use. Did you ever run by Office Depot, the post office, or the bank for your boss during lunch or on your way home?
Some auto policies exclude undisclosed household residents. Is it possible that a child might move back home after college and you forget to tell your insurance agent?
Maybe you’ll borrow that resident child’s car after they move in? Did you know that some auto policies won’t cover you while driving a resident family member’s car, if it’s insured elsewhere?
Has a family member taken on a second job delivering pizzas or delivering papers to make ends meet? Some auto policies cover this, some don’t. Do you have any idea how yours would respond?
These are all very real examples of coverage shortcomings that the “low cost” auto insurance advertisers don’t tell you about. In fact, if you ask to see their policies before buying, chances are you won’t get a copy. Consumers shop for most things based on value, not just price. The same should be true for insurance which is far too often portrayed as some sort of homogenous commodity. So the next time you see a cute or clever sales pitch from a lizard, cave man, or giggling Walmart-like “pick your price” aisle clerk, ask what you’re buying. The amount of coverage you need depends on your exposure to loss and what assets and income you need to protect today and in the future, not what you’d like to pay.