How I was scammed from my auto insurance policy

Over the years I have always heard about how some insurance companies have scammed their customers in one way or another. Even though I have always been a smart shopper when it comes to my insurance coverage, especially auto, I was recently faced with a nightmare of an ordeal related to my auto insurance.

Prior to being scammed, I had been with the same insurance company for over ten years. When I decided to buy a home, I price shopped for home insurance policies and found that there were cheaper rates elsewhere. I also discovered that combining my policies together would lower the overall rate and make my premiums lower. I finally found a company that would save me money and offer the best coverage available for the premium cost. Little did I know that they were not all they said they would be and there were several loopholes in my policy that cost me a lot more than just the cheap premiums each month.

Last year, I had a driver pull out on in front of me and because the roads were slippery. I was unable to stop and ended up broad siding the car. While no one was hurt in the other car, my passenger had to have several surgeries on his lower extremities. When my insurance company was contacted by the hospital everything seemed fine. But when I called a few hours later to report the accident, I realized that my policy was basically not as broad as I thought it was. Initially, they told me that the policy canceled out the month prior because they did not receive payment until 3 days after the due date due to a computer glitch. I checked my records and reassured them that the automatic withdrawal was taken it out, in fact, a day earlier than expected. It was almost as if they were making excuses as to why they didn’t have to pay the claim. They argued with me that there was a short lapse in coverage and they would not be able to cover my entire claim because my rate would increase and the dollar amounts were different than in my original policy. They also said that if I turned in the claim to be processed that my rates would go up and my monthly premium would rise. My passenger ended up paying a lot of out of pocket costs because the insurance company refused to pay.

The next issue I ran into was the replacement value of my totaled car. A few days later when I talked to an insurance adjuster, they came back with a considerably lower amount to replace the vehicle than I thought I would get. My car was only a year old and they only wanted to replace around $5,000 worth of damages. The car only had 26,000 miles on it and was in excellent shape prior to the accident. They stated that this was company policy and the dollar amount was based on other vehicles that were comparable in value to mine. They didn’t even ask about the overall condition of the car before it was in the accident or how many miles it had on it.

I was stuck paying over $3,000 out of pocket and that was not including the insurance premium that skyrocketed an extra $140 a month. In order to prevent this from happening again and to prevent it from happening to others, it is important to check over all of the clauses in an insurance policy or contract before continuing the policy. Don’t always ask about the cheapest policy but inquire about what all is covered on the policy and any limitations that may be involved.

– Submitted by Alex G

Lesson Learned:
Insurance is a complicated beast. Alex is right in a lot of his sentiments regarding saving money on car insurance such as saving money by combining car insurance and house insurance with the same carrier. There are several ways to save, but all of it is for naught if you don’t have what you need when the time comes.

The first step is determining how much car insurance you actually need. The Wall Street Journal gives a good break-down of how much car insurance you need, and what each policy means or what it covers. Obviously the more extensive the policy, the more expensive it is over time. For older vehicles (like my 1978 Ford Bronco), I usually get liability only. My bronco is a tank, so I’m not as concerned about personal injury (plus most of us have health insurance), but it can also do a lot of damage to fiberglass automobiles, so liability is crucial (and the minimum generally required to legally operate a vehicle).

The second step is to shop around and find a reputable insurance company by doing your research. Read reviews, don’t hesitate to shop online, read their policies to make sure it covers everything you need. Be pro-active and ask about discounts they might have available. Skip items you don’t need, or can get cheaper elsewhere (such as towing insurance).

And of course, get at least three quotes from different agencies, maybe one from a direct seller like Progressive, another from a large brand like Allstate, vary it up a bit to get an idea of which direction you want to go.

There are also a lot of tips that people don’t realize when utilizing your car insurance.

For example: Did you know that your credit history can affect your insurance premium? Not all of them do, but some insurers will assess an insurance risk score based off of your credit history.

In addition to that, some states will even allow you to stack your coverage, most don’t, but a couple will let you collect from multiple policies you might hold.

Either way, insurance is a nasty beast 🙂 You should do your research, and regularly reassess your insurance to see if you can get a better rate somewhere else. My future father-in-law recently saved $1500 a year by switching his insurer, which may be a success story here shortly 🙂

Amount Flushed Down the Money Drain: $3,000+