Beyond being nearly indecipherable to some, the typical car insurance policy is filled with legalese and outdated language, preventing some people from reading their agreement completely.
In fact, many insurance consumers fear user agreements, contracts, and policies so much that they may choose to remain ignorant of the wording.
To find out how much of the public drives around without understanding their coverage, we surveyed 1,000 people about their knowledge regarding car insurance policies. We then gathered a sample of insurance policies to learn how easy these agreements are to understand. We compared their overall readability on the Flesch Reading Ease scale, which shows how easy it is to understand text based on language, wording, and sentence structure.
How many people have never read through their policies? Can someone’s level of knowledge impact his or her monthly payment? Read on to discover our findings.
Comparing Insurance Policies to Children’s Books and Federal Documents
After analyzing the sample of car insurance policies and placing them on the Flesch Reading Ease scale, we found that the average car insurance policy was sandwiched between historical documents like the U.S. Constitution and Declaration of Independence.
Difficult-to-understand policies have made drivers ill-informed to defend themselves or even know offhand what their insurance covers. Some would even argue that you shouldn’t require higher education to understand a document that is required by law.
It’s possible to shop around for different policies, but many of the major market players have equally difficult wording that acts as a knowledge barrier.
As opposed to car insurance policies, there are people committed to making crucial statements much more user friendly. Fortunately, initiatives such as the one backed by the Legal Information Institute at Cornell Law School have analyzed more than 9,000 Supreme Court rulings referencing the U.S. Constitution. By simplifying the Constitution and translating it into plain text that the average person can understand, researchers are attempting to demystify how we understand difficult documents.
We could apply this logic to car insurance policies across America. If car insurance companies were to make it easier to understand coverage details, owners of these policies may feel empowered. As certain exemptions become available to us as we age or experience major life changes, it makes sense that our policies should be streamlined, readable, and adaptable to our dynamic lives.
Can We Explain (or Find) Our Car Insurance Policies?
Our analysis of the overall readability of car insurance policies is a dismal view of the public’s knowledge of their own insurance. Having this knowledge is important, but nearly 2 in 5 respondents didn’t know the details of their coverage, and over 1 in 5 wouldn’t be able to locate their policy online.
Knowing this information can help in the event of an accident or any time you need your coverage handy. Industry leaders like State Farm, Liberty Mutual, and Allstate, among others, have even launched mobile apps for quick access to drivers’ policies.
Besides a knowledge gap, we observed discrepancies between annual car insurance payments and readability.
Those who reported the greatest difficulty in understanding their policies paid almost $280 more, on average, than people who thought their policies were easy to comprehend.
Further, respondents who were unfamiliar with their policy coverage spent an average of $268 more on their policies.
According to our study, age also plays a role in how people educate themselves on their policies. Baby boomers were the least likely to know where to find their insurance policy online but were the most likely to say they knew what was included in their policy.
One aspect of a standard car insurance policy that must be understood is the declaration page, usually the most succinct breakdown of your policy. Learning how to decipher this text will allow you to understand your coverage, with an itemized breakdown and all of your exemptions in one place.
Policy Understanding May Lead to Higher Satisfaction
Auto policy dissatisfaction was found to be almost two times higher for those who reported their policy was difficult to read.
Similarly, auto policy satisfaction was higher for those who reported their policy was easy to read.
Knowing what is in our policies offers a specific type of empowerment that our brains crave: When we learn something new (like how to read these tough policies), our brains are trained to respond positively to learning new things, enabling us to tackle these advanced readings in stride and with confidence.
With 78% of respondents admitting to reading none or only part of their car insurance documents, it’s clear that insurers need to adapt the way they inform and share coverage with drivers.
Some companies, such as Root Insurance, are even experimenting with “usage-based insurance,” which allows an app to observe a potential user’s driving in real time to determine a quote and policy.
A common trend was for respondents to call attention to the overall difficulty of policy wording, noting they believed the text was intentionally written to be hard to understand (73%) and designed only for lawyers to read (42%).
Even the most in need of comprehending their policy agreements chose to stay ignorant to the contents: Just 30% of policyholders who had been in two or more accidents said they read their entire policy. Accidents can affect a policy and rate, so not knowing what a policy covers is risky to begin with. We all could use a refresher, but there are some who need to dive in headfirst and learn the ins and outs of their coverage.
Research shows that complicated car insurance policy language might be intentional. The only way to be completely certain you are paying a fair price and have the coverage you need is to read your policy thoroughly and to make a promise to understand your insurance.
And with the internet, deciphering and interpreting car insurance has never been easier. Look over quote comparisons and more at AutoinsuranceEZ.com to see if you could be saving money on your car insurance.
To conduct this study, we collected insurance policies from active auto insurance holders and surveyed 1,000 Americans. To qualify for the survey, respondents had to be currently paying for car insurance. There was an attention check roughly halfway through the survey. If respondents failed it, they were disqualified and excluded from our survey results.
We also tested the readability of auto insurance policies using the Flesch Reading Ease scoring system.
The data we received from the survey portion of our study relied on self-reporting. Multiple limitations come from self-reported data, including but not limited to: exaggeration, telescoping, and selective memory.
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