How Well Do Average Customers Know Their Auto Insurance Policies?

Insurance.com recently shed light on just how misinformed auto insurance customers are regarding what their policies actually cover. In the quiz, 10 multiple choice questions were asked to 500 drivers. Some examples:

 

  • What does comprehensive coverage pay for?
  • What are discounts auto insurance companies will offer if you qualify?
  • What does collision coverage pay for?
  • If your car is totaled, what does gap insurance pay for? 

Participants performed best on the question, “If a friend borrows your car and crashes it, whose insurance pays?” Seventy-one percent got that one right, while seven of the questions found less than 50 percent of participants providing correct answers. (Four of those seven were answered by less than 15 percent of the participants.)

Key Findings

Women averaged a paltry 35 percent on the Insurance.com test, but it was enough to beat the men, who scored 27 percent.

Drivers in the South were the “brightest” in the US, averaging 34 percent on the test. Poor, yes, but it was good enough to beat out the West (32 percent), the Midwest (31 percent), and the Northeast (29 percent).

Older drivers (ages 40 to 70) scored the best, while younger drivers (18 to 29) scored the worst.

See the full breakdown and take the test yourself.

What Auto Insurance Customers Should Learn From This

Auto insurance customers clearly have a lot to learn judging from the results of the quiz. First, they need to have a better understanding of what they’re actually paying for.

They should also be aware of how insurance coverages are broken down and how each can benefit them, according to Paul Morrissette, president of Chubb Insurance Solutions Agency, Inc.

Morrissette suggests the following:

1) “Liability limits that are adequate to protect current and future wealth should you cause serious injury to someone.”

Morrissette raises a good point here. Think beyond your state’s minimums. When you’re dealing with the threat of serious injury and medical expenses associated with that, minimum coverages can disappear in a hurry, leaving you liable for the difference.

2) “A company that tells you when you buy the policy exactly how much you will get in the event of a total loss.”

This is something one could decipher by reading through the coverage specifics, but as the Insurance.com survey showed, that isn’t a strong point for many auto insurance customers. It’s a good idea to address possible sources of confusion head-on.

3) “An insurer who will allow you to use OEM (original equipment manufacturer) parts when repairing the car so you don’t diminish future value.”

If you’re more than just a driver, but rather a collector of automobiles, this can be an extremely important factor. Customers like these don’t want to compromise the value of their vehicles because an insurance company is trying to save money. The average driver may feel more indifferent on this point.

4) “A policy with uninsured/underinsured motorist limits that match your liability limit. You need to protect yourself in the event that you have a serious injury due to an uninsured driver.”

Like No. 1, think beyond imposed state minimums. You have to play the “What if?” game because other drivers are unpredictable.

5) “A company with strong financial ratings. A serious accident will involve lawsuits that could take years to settle. You want your company to still be in business throughout the entire legal process.”

Very important!

State Farm insurance agent David Basch adds: “I advise customers to make sure they have coverages that are appropriate to their life circumstances, to understand the company’s claims services, and to choose an office that will take the time to explain the insurance to you and work ethically in your best interest.”

Read The Labels!

No rational human being would take medication without first reading the label to see the proper dosage. No one should do that with an auto insurance policy either, but as the study from Insurance.com proves, customers do it every day. Whether it means they’re paying for too much coverage or assuming protections that aren’t really there, it can be harmful to their health, both personally and financially. Agents who work to ensure their customers understand their policies can earn trust and loyalty for years to come.

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