Insurance Shopping Online – Food for Thought
Insurance is a financial product designed to transfer risks you do not want to assume or ones you cannot afford to assume. These risks are typically ones that would significantly impact your financial picture, often to a point where you could not recover, such as losing a home or a major lawsuit. By having insurance, you no longer have to worry about paying for damages out of pocket. You can rest assured knowing that insurance will help pay for expenses related to a loss, provided you have adequate coverage.
If the purpose of insurance is to protect the assets you have worked all of your life to accumulate, and in designing an insurance program that will successfully transfer the risk at the time of loss there are a few things to keep in mind:
Hands down, insurance is complicated!
Insurance is complex and changes occur often in the fields of law, real estate, accounting, and legislation that directly impact how your insurance needs to be structured and how it responds to claims. All policies contain language and exclusions that are different from carrier to carrier that can directly affect how you are paid for a loss.
Anytime you have a life change, your risks also change! Which means your insurance needs to be adjusted!
Changes occur in your life and it is important to have a mechanism in place for a review of your program on a periodic basis. The person conducting that review should be well versed not only in insurance but in the related fields mentioned above so that appropriate recommendations can be made.
When the time comes to need your insurance, it can’t be changed if you don’t have the right coverages!
Your insurance program can be reviewed and changed at any time except one – the moment you have a loss and need to depend on advice given and decisions made prior to that moment. You should feel confident that your insurance agent and advisor has the knowledge needed to protect you and your family & your financial security.
A good agent will focus on asking questions about your lifestyle and risks to design an coverage program around you and your family. There are many things in life that can be a potential risk that many of us don’t realize – this is where your agent’s knowledge is invaluable. By recognizing any potential risks and designing an insurance program to fit your needs, you can feel secure knowing that you have the coverage to protect your financial security in the event of a loss.
Be wary of an agent who doesn’t ask questions about your lifestyle & family and immediately tries to sell you insurance policies. When an agent is more focused on landing a sale than the needs of their customers, it’s the customer that loses out in the end.
So why should you use an agent opposed to purchasing insurance online?
In order to maintain a resident insurance license in California, the State requires a minimum of 30 hours per year of continuing education. The same requirements apply to insurers doing business by mail or on the Internet, but only one person in the organization is required to hold a license! Licenses and education are not required for clerical staff who answer the phones for customer requests on placing or canceling coverage, changes, billing questions, etc.
Insurance carriers who require that their products be sold by licensed resident agents tend to have higher price points than direct sale companies, since their agents are compensated for the expenses of maintaining a physical office with trained and licensed staff in order to provide professional, local service to their policyholders. While the price point of coverage may be slightly higher, the products and services you receive ensure that you are protected from financial hardship.
Insurance purchased online can’t be that bad, can it?
The bottom line is that coverage sold over the phone or over the Internet will often cost less, but your policy is ordered by checking the boxes on a form for the coverage you select rather than by obtaining advice from a professional. Your follow up service will be with a clerk, not a licensed agent, if anyone follows up at all. For some people, this is not an issue, particularly if price is the overriding concern in placing coverage. For others, it is tantamount to a gamble, with your financial well-being on the table.
I have spent countless hours “fixing” insurance for customers who were unpleasantly surprised by lack of coverage they had available at the time of loss from online insurance policies. As a result, I don’t have much faith in naming your price online without consulting a knowledgeable insurance professional.
It is rare indeed for me to meet with a customer who is not concerned with obtaining the lowest price on their insurance coverage. It is only good business sense to want to achieve the best possible terms and price. It is rarer still for a customer who has just had a claim to ask me if they have the lowest price on their insurance coverage. In fact, it has never happened in 35 years. Customers who actually need to use the product want to know that they purchased the best possible coverage with every possible endorsement available – but that is rarely the case.
When you are faced with a loss, such as a house fire, one of your main concerns will likely be whether or not your insurance will pay to repair or replace your home. By having a knowledgeable insurance agent, you can put your mind at ease knowing that they have worked hard to give you the best insurance coverage. An added benefit, your agent is local and can be reached quite easily – rather than having to call a 1(800) number.
Isn’t financial security the entire concept of insurance?
Beware of the mental trap of viewing a complicated product with significant adverse consequences for poor product choice or design as a commodity to be bid out for the lowest price. Medicine, law, accounting, and insurance are just a few examples of professions that require specialized knowledge and continuing education. All of these specialties also tend to have a high “price point” for the “product.”
Much of the raw information for these specialties can be accessed by the consumer directly via the Internet. That being said, having access to the information is not the same as having the knowledge and experience to interpret that information and apply it to a particular person’s circumstances.
“Our home was underinsured for the first 14 years we owned it. My lack of knowledge put the largest investment of my life at risk – a fact that still gives me chills”
You wouldn’t go to court without a lawyer and only rely on the legal knowledge you got from the internet, would you?
While any of us can spend time doing online research, is our small amount of research going to be as effective as the knowledge of someone who has spent countless hours continuing their education in that industry? Professionals can give us the advice and feedback we need regarding our specific situations and make sure you will be covered.
I wouldn’t feel comfortable going to court and representing myself without a lawyer because there are so many unknowns in the legal system. My time researching the law and my situation wouldn’t hold up to the knowledge that a lawyer gains through education and experience. The same concept applies in the insurance world. While you might save a few dollars, your savings won’t be the thing on your mind when it comes time to rely on your insurance to repair your home or car.
When did we become more concerned about price than the service or coverage we are being offered?
While online services might be affordable, they usually lack important coverage in order to maintain their low cost. If and when the time comes that you need to file an insurance claim, you’ll be happy that you tailored your insurance to your specific needs instead of choosing a cut rate policy.
Many online services offer a low price in big text to draw you in. Sounds like such a great deal, right? Well, make sure to take time to look at the fine print because that’s when you might notice it’s far from a great deal. High deductibles coupled with low coverage limits can leave you underinsured and without other options.
Can you imagine getting into a car accident and having to pay $2,500 or more out of pocket before your insurance would pay to fix your car?
Those high deductibles might save you $10 or $20 a month on your insurance, but will you have enough money to spare to cover your portion of the deductible if you are in an accident? Sitting down with an agent to discuss your lifestyle and exposures to risk can guarantee you get the best insurance for your particular situation.