Financing-supplied insurance

[n8wrl]

Greetings! I did a quick search and didn't get any relevant hits...

I just bought an L5030 and financed it for the 3 yr 0% deal they have in place. I upgraded my State Farm "personal property" policy for the higher-valued tractor. Yesterday, I got the coupons and all from Kubota to make the payments and they included a blurb from "Marsh Affinity Group Services" for insurance on the tractor for the life of the loan. It is about 2/3 of the State Farm policy and seems to cover all the same things - damage, theft, transport, etc. Does anyone have experience with OEM-endorsed insurance policies vs. "mainline" insurance companies? Just wondering if I'd be getting what I'm paying for...

-Brian

 

[Piedmont3]

The insurance you are getting from the manufacturer or financier, usually just covers the loan, not the tractor or anything else, so that if you have an accident and burn the tractor to the ground the financier gets their money. Sometimes this is called forced placed insurance.

 

[n8wrl]

The insurance you are getting from the manufacturer or financier, usually just covers the loan, not the tractor or anything else, so that if you have an accident and burn the tractor to the ground the financier gets their money. Sometimes this is called forced placed insurance.

Good point - that is what I suspected. But I called them last night to confirm. They are covering more than the loan - they are covering the purchase price of the tractor BEFORE any rebates, trades, or down-payments. They looked up my account and confirmed the purchase price as the covered amount. That means the manf insurance is $4k less than the personal articles policy I have.

-Brian

 

[Charlesaf3]

Hmm. I was under the impression this was not the case with Marsh - I just signed up with them - but I'll have to double check.

They'll only insure you for the length of the loan, unfortunately.

 

[n8wrl]

If you don't mind, let me know what you find out. I'm also interested in experiences with this insurer in particular - claims?

 

[Gary_in_Indiana]

The credit life insurance you purchase when you obtain a loan is essentially a declining balance term life insurance policy. The declining balance is the principle balance of your loan. It is almost always a terrible bargain for the buyer. The premium is paid up front in one lump sum for the entire term of the loan. That premium payment is added to the balance of the loan and you pay interest on it for the entire term of the loan. It is almost always dramatically overpriced compared to what you can purchase from your personal insurance agent.

Prremium rebates to lenders who sell such insurance on their loans is a huge profit center for them. If you really think you need insurance above and beyond what you have to pay off this one loan in your life, do yourself a favor and at least compare the rates with what your insurance agent can do for you.

If you also purchased credit accident and health insurance, the same things apply. That coverage is only for your payments starting usually 60 days after your accident/injury and only extends until you are released to return to work. If you have any other accident/health coverage that will replace your income, you don't need this. If you don't have such coverage, again, talk with your insurance agent and you'll find you can get a much better deal on the same or more coverage.

Good luck with whatever you decide. I hope this helps.

 

[Dargo]

It is almost always dramatically overpriced compared to what you can purchase from your personal insurance agent.

Prremium rebates to lenders who sell such insurance on their loans is a huge profit center for them.

Except in a few states, that is now old news and premiums have changed drastically. Many of the insurers have chosen to get out of the business after most states have mandated far lower premiums. Also, as obvious from the story the original poster told, it is no longer a huge profit center for the selling dealer. Note that he received the offer in the mail with his payment coupon. The profit to the dealers has been reduced so much that most don't even bother anymore.

I am currently licensed for life, health, property & casualty, and securities series 6 and 7 in five different states. NC is not one of those states, so I cannot speak with certainty for that particular state. However, in the states where I am licensed the premium is not age nor health dependent (he was not given a long list of health questions nor required to take health tests), and the premiums are based on a 35 year old non-smoker in good health. So, if you are under 35, in good health, and don't smoke, it is not a good deal for you. If you have any health issues, are over 35, or smoke, it is very possible that the credit insurance offered will be less expensive than what I could sell a term life insurance policy for through the dozen or so insurance companies my company does business with.

I try to stay pragmatic on the issues of insurance and only suggest the potential policy holder buy when he is ahead of the average curve for said product. If you are 50 years old, have a few health issues and smoke, you'd be a fool to pass on it. Your local independent insurance agent, if he is honest, would advise the same.

 

[Phils]

Dargo posted well. The only thing I'd add is that your State Farm policy probably doesn't cover "crash" and the one from the manufacturer probably does.

Phil