So, I bought a car and after we had agreed on the price, the salesman tried to sell me (amongst many other things) something called total loss cover. He explained that if the car was ever written off that insurance companies would never pay us what we had just paid him for the car (hang on, doesn’t that imply we’ve just been ripped off?)
The way that total loss cover works is that it makes up the difference between what your insurance cover would pay out and what you originally paid for the car.
The thing I really hate about this kind of cover is that it causes us to expect that things will go wrong, I mean what are the chances of my car being written off?
In 2010, the ABP Club said that ‘around 550,000 cars a year are written-off by the insurers’ (1) and this sounds a lot until you realize that there are 35 million vehicles on the road in the UK (2). If my maths is correct, that means that approximately 1.57% of cars in the UK will be written off each year.
Put simply, if everyone drives the same, I have a 1.57% chance of my car being written off in an accident.
But, hang on a minute, a lot of those write off’s are probably cars worth only a few hundred pounds and my car is worth more than that (at the moment anyway! Also, I have been driving for 20 years and have never had an accident, let alone been involved in anything like a write off and both these things make it less likely that I will be a part of the 1.57%.
If it is becoming less and less likely that my car would be written off, why would I pay the £399 that the salesman wanted for total loss cover?. The cover could save me a lot of money in a few years if my car was written off but the most likely scenario is that in 3 years time that it is £399 from which I will have received no benefit
I’m concerned about the way that so many of us are ruled by fear.
Sales people have learned how to manipulate us into buying extended warranties. They try hard to get us to pay more for something reliable and then they try to sell us insurance because the thing that we were buying that was previously prefect is that moment is now likely to breakdown.
It may sound like I’m against buying insurance, but that isn’t actually my point.
My point is that we shouldn’t be ruled or driven by fear.
We didn’t take out the total loss cover for £399 because we felt that that was an over inflated price, instead we found another insurer that provided the same cover for £69.
Because fear didn’t drive us into having to respond to the sales pitch, we were free to think and make a good decision.
So next time you are offered insurance or an extended warranty, say you would like time to think about it. The best way forward is often to take the money that you would have spent on a policy and put it in a savings account. That way you have a replacement fund for whatever breaks down rather than a policy for a single item that may or not fail in the relevant period.
I also believe in a God who guides us in the practical decisions of life. Pausing to pray before making a big decision is definitely the way to go.
Whenever we feel under pressure, we have no need to feel afraid because God is with us. If we acknowledge and look to him, he will lead us forwards.