“Cheap” Insurance

It’s all the same…just buy the cheapest one right?  Nothing could be farther from the truth when it comes to auto and home insurance.  However, if you pay attention to the ads on television, radio, the internet and in print they all talk about having the cheapest price. 

As consumers become more and more comfortable purchasing “stuff” on the internet, the shouldn’t be fooled into thinking that all insurance is the same.  If we go back prior to the big “mold scare” around 2000, companies in Texas sold basically the same auto and homeowner policies.  Of course consumers had their choice as to what limits, deductibles and optional coverages they wanted to carry.  The major coverages were fairly similar though.  For example, if your water heater went out and it damaged your flooring, that type of claim would be handled the same from one company to another (subject to your deductible). 

During the mold scare homeowners became in hard to get and TDI started allowing companies to make modifications to the standard HOA and HOB policies.  TDI also began allowing insurers to offer their own proprietary policies.  What we have now is a marketplace where a water heater damage claim could be handled differently by each company (one company may not cover anything, the next may provide a limited amount of coverage and the third may not have limitations).  We people shop for comparison quotes it is hard to make these comparisons; and it’s especially hard when you don’t what questions to ask.  Additional differences can be what limitations may exist on silverware, guns, and tools.  Even more importantly some companies may not pay for liability associated with a dog bite, a swimming pool or a trampoline.

Similar differences can be found in auto policies.  When a vehicle is stolen or broken into, some companies require physical evidence of damages while other companies do not require that.  Some companies extend coverage if you lend your vehicle out or if you borrow / rent a vehicle while some do not extend coverages.  The differences go on and on. 

Exclusions or restrictions in various auto policies found in the marketplace today are not hypothetical—they’re very real. Consider the following:

• Many auto policies exclude pizza or other delivery uses. Imagine how many pizza delivery drivers are on the road tonight without insurance. This exclusion could apply to all kinds of exposures, from delivering newspapers to selling Mary Kay cosmetics.
• One policy excludes undisclosed household residents. What if a child moves back home unexpectedly and assumes that, like any other family member, they have coverage under their parents’ policy? How many consumers would think to notify their car insurance companies?
• At least one insurer’s policy specifically excludes rental cars. People may rent cars on business, vacation, or while their car is in the shop.

The above are very real and we hear about situations like this on a regular basis.  So what can consumers do protect themselves? 

1.      Don’t buy insurance online.  Purchase your policies from someone local.  Preferably someone you know, like and most importantly trust.

2.      Don’t be tempted to buy “the cheapest” policy.  Ask questions.  Ask about coverages. 

3.      Get it in writing.  Don’t just take someone’s word for it.  Have them mail or email you the quotes.  Do a little homework before you make a change or ask the agent you are talking to  provide written evidence to support what they are saying.  Always read documents before you sign them.

4.      Forget about comparing what YOU pay to what others are paying.  There are way too many variables that go into determining rates to be able to make that type of comparison.  Credit scores play a major factor in determining rates.  With auto insurance I could list over 25 variables that go into determining what someone’s rate will be.

5.      Use an independent agent.  Agents who only represent one company are going to put the spin on things to try to get you to buy their product.  Independent agents can offer you several different options. 

6.      Don’t use a call center type insurance company.  You’ll never get to speak to the same person twice.  My own personal experience with call centers is horrible.  Many credit card providers, cell phone providers, electric companies, phone providers (like AT&T) use call centers where your call can be routed anywhere in the world.  You often times have to deal with a computer for the first 5 minutes of the call and then when you finally get to talk to someone you can’t understand them or you ended up in the wrong department.  Most of you know what I mean.

7.      Do a little homework.  Check out who you are plan on doing business with.  There is one insurance company right now that does a lot of advertising on television and promotes the fact that they don’t use credit scores.  That particular company is rated “F” by the Better Business Bureau.  The BBB as has a warning on their website advising consumer to not do business with them. 

So, it’s a buyer beware market with regards to home and auto insurance.  Don’t hesitate to contact us if you have any questions.  

February 27, 2014
James Brown- Lone Star Insurance Agency