How a Car Insurance Broker Can Steer You Wrong

Car insurance broker negotiate with insurance companies on your behalf to secure good car insurance policies or get you more favorable terms for the existing policy. Car insurance brokers draw on their experience and knowledge to help you find a car insurance plan that will best suits your needs. Unfortunately, some brokers are capable of steering your wrong. Whether it’s out of self-interest, lack of knowledge or outright malice, there are a number of reasons why you should not accept a car insurance broker’s advice blindly. 

Suggesting unnecessarily expensive options

While some car insurance brokers earn a flat fee, others are paid on commission. That means that they have a compelling incentive to persuade you to buy a larger policy then you would otherwise need. For example, your broker may suggest that you get more liability insurance, or try to get you to accept higher premiums. While insurance coverage is necessary, it should not come at the expense of other financial concerns.

Manipulating Numbers

In order to persuade you to sign up for an auto insurance policy, your car insurance broker may manipulate the information about its rates to his or her advantage. For example, they may neglect to mention that the rates quoted are only applicable for the first couple of months, and that they will rise after the established time frame. While some would outright lie, most would simply gloss over it, mentioning it in passing without emphasizing the true cost of insurance. The best way to avoid this is to check the broker’s credentials.

Outright Scams

In the worst-case scenario, the insurance broker may engage in outright illegal behavior. This can happen in a number of ways. The broker may lie about the rates and pocket the difference. The broker may be secretly working with an insurance company and steering the business in their direction. This can be particularly harmful if the company is fraudulent. When you try to use its policy, you will find that no such policy exists, and the company and broker vanished without a trace.

As with numbers manipulation, you can avoid this by asking the broker to show his license. You can confirm it by contacting you state’s insurance commissioner’s office. You should also watch out for several signs that what your broker is offering is less then legitimate. They include:

  • Up-Front Fees – legitimate brokers don’t charge fees.
  • Wire transfers – if the broker insists that payments should be made using wire transfers, be careful. Avoid wire transfers because they are hard to trace, and not particularly secure. Legally licensed brokers and insurance companies would use payment methods where the transactions are secure and easily verified (such as writing checks).
  • No physical location – a legitimate broker would not suggest an insurance company that exists entirely on the Internet.  If there is no physical address, do not use them.

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