Liberty Mutual has been running a lot of commercials the last couple years trying to make the case that their insurance is better than their competitors.  And it very well could be.  But you can’t make this determination simply from their commercials.  One would need to take into account the various coverages they are including in their policy vs. the cost they are charging and how that compares to their competitors.  One commercial though really stands out to me though.  It talks about how they will pay you for a new car instead of “three quarters of a car” like their competitors will do.  What bugs me about this commercial is that it’s somewhat dishonest or at least a gross misrepresentation of how auto insurance works.

What they are failing to tell you is the common sense that cars depreciate in value over time.  If you buy a 2017 Honda Accord, the moment you drive off the lot it’s not worth the same as it was an hour earlier.  After one year it may have (and likely has) dropped in value by thousands of dollars.  Just about all reasonable people understand that cars depreciate.  They lose value over time.  And insurance companies traditionally pay only the depreciated value of what a car is worth at the time of a loss.  If you had a 2014 Honda Accord, your insurance company is only going to pay you what a 2014 is worth in today’s market.  And you can take that money and go buy a replacement 2014 Honda Accord.  Not only that.. you can by 100% of a 2014 Honda Accord… not just “three quarters.”  Most people though don’t buy the same make, model and year as the one that was damaged, they buy a newer car.  And that’s where people come out of pocket for something newer better and shinier.  And this is perfectly reasonable.  Liberty Mutual though in their commercials is basically saying that they will pay for a newer model year car and that sounds like a great bonus to having their policy (depending on price).

But what’s deceiving is that they equate this to other companies only offering to pay “three quarters of a car.”  It’s a simple play on words but unless you really understand how insurance works, you could easily get suckered into thinking that not only is Liberty Mutual giving you more bang for your buck, your current insurance company is actually out to screw you over.  And I’ve already addressed who is really screwing who:  Who’s Screwing Who?

Now, if they are truly going to pay you for a current model year car even if your car wasn’t new, I would agree that this seems like a great coverage… as long you aren’t paying more than you could have otherwise.  If they are charging for this coverage or are higher prices than their competitors, than you really aren’t getting anything extra in the end.  So if this coverage sounds like something that interests you, check to see how much they are charging and then get another quote from other carriers to see how they compare.  Maybe Liberty Mutual is the same or less and that’s great.  But maybe they are $75 more a year.  Then you need to decide is if this extra coverage is worth it to be insured through them vs. Herman Munster Mutual Insurance.

So in my opinion, they shouldn’t be trying to advertise that other companies are going to pay you for “three quarters of a car,” they should just advertise that they will pay for a newer model year car than you had.  But this leads to another larger issue… truth in advertising.  But that’s another topic for another day.

As always, any questions or comments, don’t hesitate to contact me.

-Damon

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