Why You Need an Agent

A client is an executive at a large car manufacturer. He is told by his employer that he can lease a car through their employee leasing program at a discounted rate. He is also told that as a perk their leasing program includes insurance for the leased vehicle with a limit of $1M. Like most people, he mistakenly believes that if they are providing the insurance on his leased vehicle, then he does not need to purchase his own Personal Auto policy.

Fortunately, he was referred to us by a local real estate agent. When he told me he did not need any Auto insurance because he only had the one vehicle that was leased through his employer and that they were providing the insurance, I told him we should review the lease to make sure he was being adequately covered. He agreed and sent us a copy of the lease. Here is what we discovered after reviewing the lease: His employer is self-insuring the Physical Damage (damage to the leased vehicle) and providing $1M of Liability for accidents caused by the leased vehicle. This sounds good, but there are several major coverage gaps for anyone relying sole on this coverage and not having their own Personal Auto policy:

1. The $1M of Liability coverage ONLY applies to accidents caused by the leased vehicle and does not provide any coverage for claims he causes driving any other vehicle, like rental cars or a friend’s car.
2. They only provide Statutory Uninsured/Underinsured Motorists (UM), which is only $25,000 in VA. We typically recommend at least $500,000 of UM coverage as most our client’s large losses have been UM claims (all were caused by drunk drivers). This coverage protects your lost income and other expenses related to a claim caused by a driver who either has no insurance, leaves the scene, or does not have enough insurance.
3. The $25,000 of UM coverage they provide is only for the use of the leased vehicle and would not provide him any coverage in any other situation, like driving another car, riding in another car, walking across a street, or riding a bicycle.
4. The Physical Damage coverage they provide is only for their leased vehicle and would not provide any coverage for a vehicle he rents or borrow.
5. They don’t provide any rental coverage. If his leased car is damaged and will take 3 weeks to repair, they will not cover his cost of a rental car.

People often ask me; why do I need an agent when I can just buy Auto insurance online or directly with companies like Geico. This is why, situations like this arise more often than you think that require the advice of a professional insurance agent. In the above case, I advised the client to decline the insurance provided under the lease and to purchase his own Personal Auto policy. Now he is covered not only when he drives his leased car, but when he drives rental or borrowed cars as well. He now has $500,000 of UM coverage, not just $25,000, and it applies to any car he drives, rides in, or even when he is just walking or riding a bicycle, and not just when he is in the leased car.

The client thanked me and said that he had never thought about all these other situations and did not realize his employer’s coverage did not protect him when driving other cars. We don’t try and sell you coverages you don’t need, but we do try and advise you on the coverages you do.