I have been in insurance since 2007 and I have seen many clients go through tough situations. Whether you have adequate coverage or not, claims can be devastating. Not having enough coverage in a loss can make things exponentially worse. Here are some real life examples I’ve seen over the years.

Check out our Complete Guide to Florida Auto Insurance.

Is it safe to buy an insurance policy online without consulting an agent?

So many people are able to jump online and pick their own policies without the help of a licensed agent. Meanwhile, licensed agents are watching and wondering why the state makes us carry a license, E&O insurance, and take continuing education every couple of years.

Insurance is certainly complicated. I knew someone who took the exam eight times before passing and finally getting her license. Why? Insurance is confusing. Workers in the industry need to have a deep understanding of the nuances of this complicated business.

And yet, we allow customers to go online and pick the cheapest policy they possibly can without the help of a licensed agent or representative, without really understanding what sort of coverage they get.

All they know in the event of a claim is they pay the insurance company a lot of money and they aren’t covering my claim! Those scumbags!

Ultimately, it is up to the customer to understand the coverage they are purchasing. While agents like me can help guide you through the process, it’s still your decision.

Example 1: State Minimum Coverage, Maximum State of Damage

I’ll go back my early years in the business to recall one of the early horror stories of not having enough coverage. Another agent’s client had state minimum coverage in Indiana, which meant he had $10,000 in property damage liability. That means his policy covered up to $10,000 in damage he caused to other people’s property.

Also Read: A Complete Guide To Florida Auto Insurance Coverage

In this case, he caused an accident that wrecked a couple of luxury cars and a ran a large truck off the road causing damage. Without understanding what sort of coverage he had, the client initially thought, “at least I have insurance.”

The final bill was over $100,000 in damage. I don’t recall the exact amount but suffice it to say, it was almost as if he didn’t have insurance at that point.

Agent’s Note: From my experience, most people will opt to take a higher coverage than state minimum. I have found that they just need things explained to them. Once they understand the coverage they are purchasing and the risk involved with state minimum, they typically do not want that! I’ll return to my example of why they don’t want state minimum coverage.

The $10,000 did not make a dent in the amount of property damage for which the client was held liable.

*This happened in Indiana. State minimum coverage in Florida is even worse than in this scenario!

What happens next? The other parties’ insurance companies will cover the damage to their vehicles (assuming they have uninsured/underinsured motorist protection) so the clients won’t suffer the loss. Then, the insurance companies will turn their attorneys loose on you. If the at-fault, underinsured party doesn’t have the money to pay for the damages, it’s likely that his wages will be garnished. It’s not a pretty picture. It can be devastating.

Example 2: Emergency Situation

I had a client choose a decent liability coverage. It was 100/300/100. This means they actually had $100k in property damage liability coverage. We had discussed pumping that up to $1.1 million in property damage coverage by adding an umbrella. As I recall, it was only an extra $10-$15/month.

Ultimately, they decided they had enough insurance with their current policy… You can probably guess where this is going. They declined the extra protection (which was actually quite uncommon at my agency).

Eventually, the decision came back to haunt them. Their son was a rated driver on their policy and he had a collision with a firetruck. Luckily, everyone was okay but evidently those trucks have some complex and expensive systems on them.

I still have trouble wrapping my mind around this, but the bill came in at $150k. She called me later to tell me she remembered and regretted turning down that extra million dollars in liability coverage. The insurance company paid $100k and the client wrote a check for the other $50k.

Example 3: A change in circumstances can void your coverage

I’ve seen this one a lot over the years. Customers don’t realize that their policies are rated on a multitude of factors. I want to focus on garaging address and household drivers for this one.

Parents will let adult children who have their own houses, drive their vehicles in long-term scenarios. A common mistake is made when they fail to notify their insurance agent or company.

Some companies have different methods of rating these vehicles, but they need to be notified. Usually, the company wants to make sure they have the correct garaging address and account for all the drivers in the household.

If you have a driver of a vehicle with a ticket and accident, the insurance company will want to rate that person appropriately on the vehicle. If the out-of-household-owner of the vehicle remains the rated driver on the policy, the insurance company won’t charge the right rate for the driver.

That sounds good for keeping the premium down, but it can also be considered misrepresentation. That policy is clearly not rated correctly and that would be grounds for denying coverage.

I’ve seen people not report address changes and have a claim denied.

I’ve also seen people who have roommates or live-in boyfriends or girlfriends who routinely drive each other’s vehicles. Like I said, many insurance companies can handle these scenarios differently, but rest assured they want to rate the policy according to the risk.

If you think you’ve found a way to keep your rate artificially low then you are likely violating the policy contract.

They will deny your claim.

Always check with your agent when you have a change in living arrangements, whether it’s location or household drivers. It’s better to find out before a claim rather than after.