But there are several other differences between insurance and vehicle protection. Understand them so you don’t get caught off guard, and understand the rules and regulations of each one so you don’t hire protection thinking it’s insurance!
WHAT IS VEHICLE PROTECTION?
Vehicle protection is a product marketed by associations. Where there is risk-sharing, this means that people pay a monthly amount to have the coverage taken out and, in the event of an accident, the money to cover the losses comes from a mutual fund.
This is called pure mutualism, and it is important that the rules are formalized in a contract and that members are made very clear, as they may be called upon to provide additional resources if the loss ratio of the portfolio rises above expectations.
WHAT IS CAR INSURANCE?
Auto insurance is an indemnity contract, meaning that, in exchange for paying a premium, the insurer agrees to pay neither more nor less than the loss suffered by the insured. The purpose of the insurance contract is to restore the economic position prior to the accident.
Insurance is a product sold by insurance companies linked to Susep. Insurers are specialized in assuming third-party risks, which means that they have the obligation to pay the insured, or whomever the latter designates (beneficiary), an indemnity when an accident occurs.
In the event that the insurer’s technical reverses are insufficient to pay the promised indemnity, they must demobilize their capital to pay the promised indemnity. For this reason, regulatory bodies establish different rules for companies in the sector, so that there is an orderly and efficient functioning of the insurance market and to ensure that such companies always have the financial conditions to pay the promised indemnities.
DIFFERENCES BETWEEN AUTO INSURANCE AND VEHICLE PROTECTION
- Risk analysis:
When contracting insurance, it is necessary to provide a certain amount of information, the insurer analyzes the entire profile of the insured, and their risks. These factors allow the company to define the chances of the occurrence of a claim, and thus it is also possible to determine the cost and deductible of the insurance more accurately.
In vehicle protection, in general, there is no analysis of the insured’s risk profile, so adherence is usually less bureaucratic and quick.
Auto insurance has a very detailed policy, with all the insured’s data, in addition to the rights and duties of both parties.
In vehicle protection, there is no policy, what exists is a mutual responsibility agreement, in which it is established that the risks are divided among the associates.
In auto insurance, there are laws that determine that the insured receives compensation within 30 days.
In vehicle protection, the consumer is compensated according to the existing cash flow, so the indemnification period may be longer. And there are several reports of compensation being paid below market value.
In auto insurance, the insured accumulates points with each passing year and does not call the insurance company. Upon renewal of the policy, these points become discounts for the new hire.
In this way, the consumer takes advantage of signing a new contract, if there is no claim. This does not occur in vehicle protection.
Auto insurance can be canceled at any time, it may be necessary to pay an amount proportional to the period that the individual used the service.
In vehicle protection, contracts usually have a minimum term of stay of 180 days. If canceled before then, a fine will apply.
WHICH SHOULD I HIRE?
Taking out insurance is usually much more advantageous and peaceful, as it has a series of rules and is regulated and supervised by a legal body, Susep. After all, if it is necessary to activate the insurance, the user will be sure of his compensation.
The entities that sell vehicle protection operate in disregard of the law, without prior authorization to operate, without regulation and without inspection. Their great appeal, the lower price, is a consequence of the fact that they operate unregulated. But the cheap can be expensive, there are several cases of damage to consumers, since they do not have any kind of guarantee and supervision by the State.
Now that you know the differences between insurance and vehicle protection, evaluate your contract well.