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Disadvantages of Group Auto Insurance

A group auto insurance policy can be a very attractive coverage option for members of organizations and unions as well as for employees of companies participating in such groups. They give eligible members the opportunity to participate in coverage that in many cases can offer price savings to the group as a whole. There are many advantages to group auto insurance; however, there are certain disadvantages to this type of auto insurance program as well.

Pricing is generally a strength of group auto plans, but there are certain aspects related to pricing which may cause certain eligible members to shy away. Group policies can include any eligible member, but the transferability of such policies can be an issue. The protection in coverage afforded by group car insurance plans is generally excellent, but individual choice may be limited. A closer examination of some of these potential drawbacks to group auto insurance can help eligible auto owners to see the full picture and decide whether or not they wish to participate.

Pricing Affected by All Members

One of the biggest draws most of us have to participating in an auto insurance group is monetary. Based on what we hear from insurance representatives and from other drivers participating in groups, our expectation is that by joining, we are guaranteed to save money. It must be pointed out that in a general sense, this is probably true: auto insurance groups tend to be able to offer lower prices to group members than individual policies. There are many reasons for this, but basically the difference comes down to volume.

The larger the insured group of drivers, the more the risk is spread out. Insurers can cut the group members a break on rates because of the fact that the group essentially comes to them and there is no selling or marketing involved beyond initially setting up the group plan. Beyond this savings, the impact of one accident or one poor driving record is lessened because it can be basically spread out across the group. This is a good thing if you are that driver with the recent history of at-fault accidents or a poor driving record in general. If you have had trouble finding affordable rates through the years, membership in a group auto insurance plan might be just what you need. But for drivers who have clean records and great credit scores, just the opposite may be true.

If you have always qualified for preferred driver rates and safe driver discounts from your insurers through the years, group auto insurance may actually hinder your ability to save money. Depending on the specific demographic represented in the group, your group rates as determined by the auto insurance provider might actually push your policy premiums up higher than they would be if you just contracted an individual policy on your own and decided not to participate at all. You must keep this in mind as you contemplate participation in auto insurance groups. It does not hurt to gather some prices for doing it both ways, and you are certainly under no obligation to join-one of the great benefits of most auto insurance groups is that membership is generally voluntary.

Group Policies Often Non-Transferable

Just like with the pricing aspect, one of the other perceived strengths of the group car insurance concept is also a source of one of its weaknesses. Group membership requires meeting eligibility standards: belonging to a civic organization, being an employee of a company a union, or being associated with some other participating group. Part of the draw of getting set up with an auto insurance group is the fact that its existence can add value to membership or employment in a group or company. You can use it as a selling point for those you are recruiting to join or hire in. But this strength-the exclusivity of membership-also masks a corresponding weakness.

Any group member who loses or resigns membership in the participating organization immediately becomes ineligible for membership in the auto insurance group. Thus, if you decide not to renew your membership in a civic group, or if you take a job with some other company, you will have to start over in your search for suitable auto insurance coverage. The benefits of group membership will no longer be available to you. This can be both inconvenient and expensive to drivers who see actual savings in their premiums due to participation.

If you have enjoyed much lower auto insurance premiums thanks to your membership in a group auto insurance plan, it might give you reason to rethink quitting that non-profit organization just for the sake of your policy. As for your employment, generally we only switch jobs when the benefits outweigh the drawbacks, so this is just one more small factor to take into consideration, one part of the overall picture to ponder before turning in your two week notice.

Group Auto Policies Sometimes Inflexible

Aside from generally advantageous policy pricing and the basic exclusivity of group membership, the other primary advantage of auto insurance group policies is the great coverage they can offer to members. In most cases, these groups (especially the larger ones serving big organizations and companies) are set up and administered by large, well-known auto insurance carriers. They are designed to sell themselves, in a sense. The goal of the insurers offering these group plans is to make it difficult for eligible drivers to turn down participation. They want to make the plans too good to pass up, so they typically offer great values on extensive coverage.

But once again, a primary strength of group auto insurance hides its twin, the weakness accompanying that strength. Surely these plans do offer great coverage at generally reasonable policy prices; the trouble is, they are sometimes inflexible in the way they are set up. For the entire group to qualify for discounts on certain areas of coverage, often the whole group or at least a large percentage of it has to elect to carry this coverage. For example, an auto insurer might offer great rates on elective collision insurance to a group, but they may require all members of the group to add collision coverage to their individual plans in order for the discounts to be good.

This sort of inflexibility in coverage options can help the insurer to focus their efforts and offer a better overall value for members of the auto insurance group; but at the same time, it can discourage certain eligible parties from participating. For example, a driver who only owns an old, beat up car would probably not be interested in adding collision insurance to her policy even at a discounted cost. This kind of coverage is still not a value to her, because it is not an area of coverage she has any need for.

There is no doubt that group auto insurance can be an excellent option for eligible drivers in many cases. However, there are certain factors to consider before any eligible driver signs on. Group auto insurance plans are a great option, but they're not for everyone. Decide for yourself whether they are right for you.

 

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