My son had a huge smile on his face as he drove us to our insurance office. He just passed his driver’s license road test, and we were headed to talk to our insurance agent to add him to our policy.
We were prepared, handing them a copy of his license paperwork, as well as a copy of his most recent report card to score us a 15% good student discount. As the agent was entering the information into the system, she lowered her glasses and said, “I should probably mention, there’s something we suggest for all newly licensed drivers.”
And that’s when she proceeded to explain additional coverage that we needed to purchase.
Know Your Current Policy
We currently have $100,000 liability coverage, meaning if we get into an accident the other party would be covered for up to $100,000 of medical coverage. Our agent recommended the following changes:
- Increasing our liability coverage to $300,000
- Adding an umbrella insurance policy (that would tack an extra $1 million of coverage on top of not only our automobile policies, but our home owner’s insurance as well)
The reason given was that newly licensed drivers have a higher rate of accidents, and it would be a shame to have him get into an accident, and then have our liability coverage be insufficient.
At first it seemed like a great idea, and I was ready to tell our agent to sign us up on the spot. But, having been burned countless times with impulsive purchases, I simply asked for the paperwork to review and discuss with my wife.
Take Time to Consider
As I thought about it more, it seemed like my insurance company was simply using the emotional concern I had for my son as a new driver as a tool to convince me to buy more insurance. While it’s true that new drivers have a greater rate of accidents, does that really warrant an increase of over a million dollars of coverage?
If our current liability coverage was insufficient for our son, wouldn’t it have also been insufficient for my wife all along?
It’s very possible that $100,000 of liability coverage is too low, as we’ve had our policy set like this for well over ten years. But, that’s not how a need to increase our coverage was marketed to us. They played on our concerns over having our young son driving around town by himself.
Don’t Agree Before Doing Research
Doing a little research I found the minimum liability insurance required by law varies by state. In the state we live, Minnesota, we’re required to have a minimum liability coverage of $30,000. Having $100,000 is fairly standard, and $300,000 is considered the high end.
My research also showed that a $1 million umbrella insurance is the maximum policy offered by most insurance companies. So not only did my insurance company play off our emotions to sell us more insurance, they recommended the absolute maximum they offer.
When contemplating making changes to your insurance policies, I recommend three things:
- Don’t Be Impulsive: Take your time to fully contemplate the best course of action. This will help take the emotion out of the decision.
- Do the Research: Just because your insurance company is recommending something, doesn’t mean it’s the right choice for you. Do some research to determine what is required, what you’re comfortable with, and what fits within your budget.
- Get a Second Opinion: Get more than one agent’s opinion on what coverage is right for you. While you’re at it, get a quote and see if you can get the same coverage for cheaper somewhere else.
Even though it became fairly obvious that my insurance had their own income stream in mind when making their recommendation, we may still change our policy. The increase would add $20 to our monthly insurance bill, and may add quite a bit of peace of mind.
But whatever we decide, it won’t be based on the emotions that come with having our young son having his license. It will be be based on logic, research, and what’s the best choice for our family.
Have you experienced something like this with your insurance company? How do you deal with recommendations based on emotions?