Most people think shopping for insurance is like shopping for clothes- try on a few shirts, slip on a few different pairs of shoes, compare prices, and buy the best quality for the lowest price. But shopping around for a new insurance policy requires a bit more attention…and knowledge.
Let’s say you want homeowner’s insurance and request quotes from 3 different companies. You’d compare the premium on Quote A, Quote B, and Quote C. Whichever company gives you the best rate would be the company you should choose, right? Not so fast…Pause a moment and take some time to really read though those quotes and understand what’s covered and what’s not. One way that prices in insurance can differ from carrier to carrier is by changing coverages. For ex. three different agents may quote a policy for you and come up with three different prices. It is very possible that each of them entered different limits and rating factors to get you the final quote. That is why it is very important to always review your insurance policy to make sure you fully understand what is and isn’t covered. Unfortunately we have seen some horror stories. Some of our clients thought they had adequate protection for their homes for ex. until they came to us. We always do a comprehensive review of all of our client’s policies. We found that some of our clients were grossly underinsured on their prior policies. For example some had their roofs covered at Actual Cash Value (ACV) rather than Replacement Cost (RC). If you’re going to cover a home’s roof as ACV you might as well not have coverage at all. The difference between ACV and RC is substantial. ACV is the value of a product or property less depreciation. In the case of the ACV roof that means that if you installed your roof 15 years ago and it cost you $25,000 your roof may only be valued at $2000 today. So the insurance company would say we’ll pay you $2000 less your deductible. Depending on your deductible this may mean that you wouldn’t get anything back from the insurance company in the event that your roof was damaged. RC is just that. Replacement Cost. That means that the insurance company will pay whatever it needs to to replace your roof with a like kind and quality roof. Other omissions from our client’s old policies were items like Personal Injury protection on their landlord protector policies. Personal Injury protects landlords agains lawsuits brought to them from existing and prior tenants for things like wrongful eviction.
It’s imperative to think about the future. Will you be adding new additions to the house? Buying new equipment? New furniture? How about jewelry, china or computers? Most of us completely forget to inform our insurance agent of these types of changes. Any time that there is any major changes to your home or property it is very important to let your agent know so that your policy can be amended to properly protect your most important assets.
The important thing to keep in mind is that pricing is dictated by coverage. When evaluating the three quotes mentioned above, remember that it’s not always an “apples to apples” comparison that you might think it is. The varying premium prices can be due to the fact that your quotes have been rated differently and offer different amounts of coverage, which is why you should always have an agent review these with you. The more informed you are, the better decisions you are able to make!