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September 3, 2010

Inside Insurance: Consumer knowledge is important

By David Colmans

It’s called add-on insurance. When a consumer makes a purchase, gets credit, rents a vehicle or other similar transactions, often times the vendor or selling company asks if the customer would like an insurance policy to “protect” him or her from a variety of perils.

Here comes one of those teaching moments we hear about these days. There are times when certain coverages can be helpful and others when they are simply not necessary. Also, some of the services offered are actually not insurance, but are, in fact, a warranty. The e-How website describes the difference this way:

“A warranty ensures that maintenance will be covered for normal wear and tear while insurance provides you the comfort of knowing your property will be replaced or repaired if damaged.”

I rent vehicles regularly for business travel, and I always decline the additional insurance offered by the rental agency because I have auto insurance coverage under my personal policy for my own vehicles. There is no point in purchasing additional coverage from the rental company because I’m already covered. An exception might be if the renter doesn’t own a vehicle and has no personal insurance or if the renter has dropped collision from their auto insurance. Then the add-on may be something that should be considered, but not before doing some pre-rental research.

Another suggestion for your financial protection involves the use of major credit cards.  Check with your card company to find out if your financial institution provides some level of protection if your rental vehicle is damaged or destroyed in a traffic crash.

There are several actions a consumer can take before making a commitment to purchase these types of policies, especially if they are offered by a third party such as a rental agency or other salesperson.

Check with your personal insurance agent to see if your current coverage provides protection with an existing policy such as I pointed out regarding vehicle rental insurance.

Instead of being forced into a snap decision, take the time to do some basic research on the Internet about what is being offered and see what others have to say.

Before you buy, look into what the cost is of the warranty along with any articles there might be on the product, such as from Consumer Reports.

Is travel insurance necessary? As one who is pulled in many directions regarding disaster responses and other quickly developing events, I might very well consider travel insurance to cover trip costs should I have to cancel at the last minute. There are stipulations on different types of travel insurance policies, so check to see what is and what is not covered.

On the other hand, that may not be necessary for many who are not involved in a fast-changing environment and if there are cancellation provisions for severe weather or other events over which one has no control. Again, this becomes an issue where the consumer should do research before making a costly and possibly unnecessary decision.

Add-on policies — like all insurance — are purchased because someone feels they have a risk. Making sure you have the right type and amount of insurance means you are better protected.



David Colmans is the executive director of the Georgia Insurance Information Service. Contact him at (770) 565-3806 or e-mail dcolmans@giis.org.

 

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