Insurance is a highly regulated business. Each state has its own rules that are strictly enforced by a dedicated department of insurance. The regulations are intended to protect you from fraud do a good job. That may not be enough to protect you against being taken advantage of in other ways, such as from a dishonest insurance agent.
For example, an agent might try to sell you a policy that you really don’t need or coverage that doesn’t match your risks. To get the right coverage at the best price you need to know what questions to ask, especially the ones they don’t want to hear.
Here are eight topics to keep in mind when talking to insurance agents:
Whether it’s a disease specific policy that guards you against cancer or AIDS, or flight insurance, specialty policies are seldom worth the expense.
Many of these life insurance policies are sold on the basis of fear and in most cases you are probably already covered by other insurance. If you are truly worried about the risk of contracting a deadly disease due to a family history consider an upgrade to your comprehensive medical insurance instead.
Not all optional coverages are designed to simply raise premiums. Some are actually a good idea and leaving them off can cost you in the long run.
Problems arise when agents want to make a sale and aggressively compete on price. They may suggest leaving off or dropping an optional coverage.
One such tactic is discarding underinsured motorists from a policy as unnecessary. The reality is that as much as 25% of drivers don’t have enough insurance on their vehicle. Without underinsured motorist coverage you can find yourself paying out of pocket for repairs if you are involved in an accident with them.
Many auto insurers have jumped on the accident forgiveness bandwagon. What agents don’t want you to know is not that it is optional and that it’s not a bargain. The programs charge you a higher premium up front and then if you have a minor accident they won’t raise your rates.
The problem is that you are paying for the accident before you have it with the added cost of the optional accident forgiveness. It’s like paying years in advance for dinner at a restaurant in another part of the country so that if you visit there someday your meal will already be paid for.
A price too good to be true
There are times when looking a gift horse in the mouth is exactly what you should do. Like when an insurance agent hits you with a premium that is substantially lower than other quotes you have received. The agent may not want you to know that their low price is because something is missing, like the same amount of coverage.
What’s missing may not always be obvious. For example, two homeowners’ policies may both insure your home for its full replacement cost, but one has a deductible that is 10 times higher than the other.
When comparing prices it’s important to make sure you are comparing apples to apples. Make sure that the coverages are identical and not just similar.
The devil is in the details
Insurance agents in all 50 states are required by law to allow you time to read your policy before accepting it. They are also required to explain the coverage you are paying for. They just don’t have to do it with equal enthusiasm!
That’s why it’s important to read the entire policy yourself, paying particular attention to the exclusions. One policy can be much lower in cost than another because of what is not covered.
Another way lower costs are hidden is in policy limits. The limits are the maximum the insurance company will pay out for a claim. Limits are different than deductibles, which are the amount of money you will have to pay out of your pocket before the insurance company starts paying.
Insurance agents who are trying to beat a competitor’s price don’t like to be asked how these things compare. So be sure to ask because it’s in your best interest to know the answer.
Credit scores make a huge difference
The most recent tool an insurance company sheds for setting premium rates are credit scores. Insurance agents will downplay their importance if they believe your score is low. They will overplay their importance if they believe your credit score is high.
The Federal Trade Commission allows credit scores to be used to determine car insurance rates because they do accurately predict how people file claims. Credit scores can’t be used in California, Massachusetts or Hawaii.
There isn’t much you can do about it, no matter what the agent says. What the agent doesn’t want you to know is that not all insurance companies use credit scores. That’s important if your credit score is not great. In that case knowing which companies use them and which don’t can save you money. The reason insurance agents don’t want you to ask is because it can cost them a sale, especially if they only deal with one company.
It pays to shop
There are two types of insurance agents, captive and independent. Independent agents represent multiple companies.
Captive insurance agents sell insurance for a single company. They will often promise lower rates than their competition and offer comparisons to prove it. Their comparison rates can include rates from three to five other companies. What captive agents don’t want you to know is that the rates from the other companies are not actual quotes. They are estimates based on public records and can be off by 25% or more.
On the other hand independent agents don’t want you to know that there are literally dozens of insurance companies in each state and they only represent a handful. That means even though you are getting the benefit of some comparison, it is may not be thorough.
The only way to ensure you are getting the best rate is to shop around yourself using multiple resources to check multiple companies.
A quick settlement isn’t always good
Insurance companies love to boast about how quickly they pay claims. What they don’t want you to know is that you don’t have to accept their first offer.
They would also prefer that you don’t know that fast is not always the same as fair. Insurance companies rely on your desire to get your home or car fixed and back to normal as quickly as possible. They use that to their advantage by making their initial settlement offers their most conservative.
Insurance agents will often mention a company’s record of fast payments as a selling point. They don’t want you to ask how satisfied customers are with the claims process since that is the measure that really counts. That is why when comparison shopping it pays to ask about a company’s customer satisfaction record.
Insurance agents work on commission
Of course insurance agents get paid for what they do. They don’t necessarily want you to know that their pay is based on how much money you spend. There is nothing wrong with a salesperson being paid on commission, but it can make a difference in the advice they give.
If an insurance agent spends 90 minutes with you going over auto and homeowners insurance and makes a commission of $200 that’s fair. But if that agent can get you to agree to additional coverage that is not necessary their commission goes up to $300 for the same amount of work.
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