Why Does My Cavalier Cost More to Insure then his BMW?

This is probably the #1 question I and a lot of other brokers hear on a daily basis and even after telling clients the answer, most think you are just blowing smoke up their ass and don’t believe you. There are a few different reasons your price may be higher on a less expensive car. The first is the obvious one but the second reason is the one that people really don’t understand.

When you get an insurance quote for your car, the biggest misconception is that we are insuring the car. The first thing you need to know is that we are mostly insuring you (the driver). The car is not going to speed, cause an accident or kill somebody, you will. So no matter what kind of car you drive, if you are a bad driver, you have two choices:

1.Pay an arm and a leg for a few years until your record gets clean, or
2.Take a bus

 

Now that we have gotten the most obvious answer out of the way, you’re probably thinking “my record is clean and my Cavalier still costs more to insure then his BMW”. Keeping in mind the fact that we are insuring the person and not just the car, the next thing you need to know about car insurance is that the car is almost irrelevant to the cost of car insurance (unless you drive a Lamborghini). To better explain that, let’s look at the different coverage on your auto insurance and the maximum payout for each on a $50,000 BMW:

Damages to car: $50,000 max (the cost of car)
Liability: $1,000,000 max (most people have $1,000,000 coverage)
Accident Benefits: Unlimited (The insurance company could be paying your lost wages for however long you are injured)

So, when looking at the three main areas of coverage on your insurance policy, you can see that the max payout on the car itself is nothing compared to the amount that can be paid out if you get injured or cause injury to others which proves my point that the cost of the car is almost irrelevant.

I say almost because a safer car is a better car to insure. Which car are you most likely to get injured in? A Cavalier is practically made from plastic and is more likely to be a write-off after an accident then a BMW that is built to last. I currently drive an SUV and the rates for my $30,000 SUV are cheaper then they were for my two door, $16,000 Cavalier that I used to own, and I can tell you I sure feel a lot safer driving on the highway in an SUV then I did in the Cavalier.

Some of the least expensive cars to insure: SUV’s and Minivans
Some of the most expensive cars to insure: Small Sports cars and the less expensive low end models from each car company

www.mikeleinwand.com

I Rent, Why Do I Need Insurance?

Most people think that renters insurance only covers contents and sometimes think it’s not worth the money to get the coverage.

The first step to realizing you need the coverage, is knowing what coverage you’re actually getting. Renters insurance doesn’t just cover contents, it also covers additional living expenses and more importantly, personal liability which every single person (rent, own or lives with parents) needs.

Personal Liability
This covers you anywhere in the world for lawsuits against you. If somebody were to sue you for personal injury or causing damage to their property, you would be covered under the liability coverage of your renters’ insurance policy.

Most people have $1,000,000 liability coverage; some even go to the provincial max (Ontario) of $2,000,000. Could you imagine being sued and ending up having to pay $1,000,000 out of your own pocket.

There is only one place in the world your renters insurance does not cover your liability… in your car. When you are in your car, your car insurance liability coverage takes over.

If you own a home, this is covered on your homeowner insurance, if you live with your parents, this is covered on their insurance, if you rent you need to have renters insurance to have this coverage.

Additional Living Expenses
This coverage usually has a set dollar amount and covers you for finding other accommodations after a claim. For example, if there was a fire in your apartment and you had to move in to a hotel while it was being repaired after the claim, the hotel expense would be covered under this section of your policy.

Contents
Plain and simple, covers the contents in your home and with you while away from your home. Did you know that if your car is stolen, anything not attached to the car is not covered under your car insurance, it is covered under your home (or renters) insurance.

For example, if your car is stolen and you have a laptop, golf clubs, iPod and a portable GPS in your car, your car insurance will not cover them!! They will only be covered on your home (or renters) policy.

Renters Insurance is too important to go without so don’t wait until it’s too late because you’ll kick yourself when the time comes and you wish you had spent the $15/month for the coverage.

What is No-Fault Insurance?

When you hear the term “No-Fault Insurance” you probably think it means that if you have an accident you will not be found at-fault no matter what happened. This is not true and the term no-fault insurance actually has nothing to do with who is at fault after an accident.

In Ontario (and other provinces) there is always 100% fault to be handed out to each driver involved in an accident. You will always be found 100%, 50% or 0% at-fault as determined by a set of rules stated by the Insurance Bureau of Canada.

So what does no-fault insurance mean?

No-fault insurance simply means that regardless of who is at fault in an accident, each person involved deals with their own insurance company to pay the claim for damage to their car or injuries to themselves as opposed to suing the other person involved in the accident. This eliminates lawsuits between insurance companies which saves tons of money for both the insurance company and the legal system, and also speeds up the time it takes to settle your claim.

So, if an insurance sales person ever says “I can offer you no-fault insurance” they are trying to play you for a sucker. No-fault insurance is not coverage but a law and everyone in Ontario has no-fault insurance.

www.mikeleinwand.com

Why Pick a Broker Over a Call Centre Insurance Company

Would you use a call centre lawyer when you get sued or a call centre doctor when you are sick? Could you imagine calling a number and hearing “press 1 if you are dying, press 2 if you are seriously injured”? When it comes to professional services, we look for professionals to help us, except when it comes to insurance for some reason.  

 

Hopefully you will never have to use your insurance, or at most all you need to use it for is to pay for repairs to your car, but for some people who get seriously hurt or accidentally hurt somebody else (and you wont know if it’s you until it’s too late), insurance is one of the most important purchases you will ever make.

 

G-d forbid the day ever comes where you are lying in the hospital and you need your insurance accident benefits coverage to come in to play, but if that day does come, you will regret not having an insurance broker working for you.

 

When you contact a call centre insurance company in your time of need, the person who answers the phone is an employee of the insurance company and has that company’s best interest in mind. That is not to say that they are evil and will not do their job properly, but keep in mind that they are hired, paid and fired by the insurance company, so who is their loyalty going to be towards when it comes time for you to fight for your insurance payout? Are they going to help you get the most you can get?

 

Now take a look at an Insurance Broker. Brokers do not work for the insurance company. They are paid only when clients agree to let them represent their insurance. Brokers can be called the middle man. The client hires the Broker to deal with the insurance company and the broker is compensated only if the client is happy and renews their insurance every year. So, the Insurance Broker works for you, the client first and will go to bat for you when the time comes to fight the insurance company.

 

Imagine getting sued and going to court and defending yourself without a lawyer. Not a smart move. Now imagine you get into a car accident and have to fight against your insurance company to get your accident benefits coverage. Would you rather fight yourself or have your own insurance broker to fight for you?

 

Insurance is a complicated thing to understand and we don’t have the time to learn it all, and that is why you need a professional to handle your insurance.

 

You’re probably thinking “wouldn’t it be more expensive to get a broker over a call centre since they make a commission?”

 

No, not at all. An insurance company that pays commission to brokers does not have all the expenses that a call centre insurance company has. The call centres pay for the building, the phones, the employees, and all the other office expenses. Insurance companies that pay independent brokers a commission don’t have to worry about those expenses and the price of a broker’s commission compared to the office expenses of a call centre insurance company are pretty much equal and you can find insurance just as cheap through a broker as you can through a call centre.

 

Call centres are not necessarily a bad thing; I worked in a call centre environment for the first three years of my career which brings me to another point; call centre insurance representatives are not professionals. Most are right out of school and using the call centre as a way to get experience before becoming a broker. Most call centre representatives spend a max of three years in the call centre and move on to bigger things.

 

Insurance Brokers are in it for the long run. Our main goal is to build a long term relationship with our clients that will last many years. I have many clients who have young children and I know that if I keep those clients happy and I help them to the best of my ability, when their kids are grown up and need insurance, chances are they will come to me. Just like the family doctor or lawyer, I plan on being the family insurance broker.

 

Whether you come to me for your insurance or not, please do yourself a favour and consider choosing a broker over a call centre. Finding the right insurance broker to represent you can make a world of difference when that day comes and you need somebody in your corner to go to bat against your insurance company.

 

 

Mike Leinwand – R.I.B.(Ont.)

www.mikeleinwand.com

 

 

The information provided in this blog is written by a licensed insurance broker in Ontario Canada and the facts are based on Ontario Insurance law and may differ outside of Ontario Canada.