The insurance industry was created as a way for investors to protect themselves and their greatest assets. Most financial analysts and do-it-yourself risk management courses will include an overview on good insuring practices as well as recommended coverage types. However, in contrast with the industry goals, many insured’s seek to maintain the minimal possible amount of insurance coverage so that they decrease their expenses. Many are naïve to the fact that, although their expenses have been temporarily decreased, taking a cheap and inadequate policy will expose their protected assets and opened them up to a quick financial ruin. So how should one shop for insurance?
Cheap personal insurance packages can save you some pennies today and cost you thousands tomorrow. Here are some things to look for when shopping for your next personal insurance package. Don’t just pick a price and assume the coverage will provide the protection you need — ask good questions and try to understand what you are paying for! A good agent will take the time to understand your concerns, answer your questions, and recommend a package that best suits your needs.
Original Equipment and Parts –
Many insurance policies will provide you enough coverage so that you can get manufacturer parts for your vehicle. This is especially important if you have a newer vehicle, you prefer to have your vehicle serviced by the dealership, you vehicle is a special/limited edition, or you have custom parts on your vehicle. Nobody wants aftermarket parts put on a new vehicle but if you don’t check your coverage, chances are good that you are only covered for the cost of aftermarket parts.
Deductible Deception –
Every individual has a different comfort level when it comes to their policy deductible. Some people prefer a high policy deductible because this keeps the price of the insurance lower. However, they then endure greater financial consequence and out of pocket costs if they experience a claim. Taking a very low deductible will cause the policy prices to be higher but will greatly cushion the impact of the out of pocket expenses associated with a claim. Some policies even offer features like a decreasing deductible! Before you are convinced that a policy is offering you savings, make sure you are comfortable with the deductible they have quote you at – it could be out of your comfort zone and will create a terrible claim experience later on!
Replacement, Replacement, Replacement! –
A policy price will be greatly impacted by how much the company will pay for a claim. A good auto policy will pay the cash value for an older car but a great auto policy will pay to replace your newer vehicle! What about your home or personal belongings? You definitely don’t want to get cash value for these items! If you have a claim and the company only pays you enough money for the current value of your items, how are you going to afford new clothes, furniture, dishware, electronics, home décor etc… ? You would end up with a lot of out of pocket expense before you are truly back to the same state you were prior to your claim. Opt for replacement; ask if it is available on your policy!
Liability Let Down –
Although insurance policies give you many different types of coverage, the Liability coverage is probably the most important! The Liability part of your policy is designed to protect you from lawsuits when you are negligent and others experience injury, death, or damages. Your policy will only cover certain types of liability exposures and will be specific about what is not covered under the “exclusions” section of your declaration page. Since this is the most important part of your policy, doesn’t it seem logical that you want to take a substantial amount of coverage here? Most “pick a price” quotes will give you the minimum amount of liability allowed by the state and leave you highly exposed to lawsuits. If you are held liable for an accident and you don’t carry enough liability insurance, you can experience terrible consequences like a personal lawsuit, garnished wages, reduced personal assets, fees and penalties. This common situation can leave you forever struggling to get out of financial debt! So, before you pick a price, pick a coverage limit that you are comfortable with instead of assuming that the insurance company has your best interests in mind!
The Little Things –
Sometimes the coverages that you value the most are the small ones! Does your policy provide you with identity theft protection, lock replacement, roadside assistance, towing and rental, airbag and seatbelt replacement, animal protection, and windshield replacement? Although these items are small, and often need to be added to a policy a la carte, they are usually inexpensive and can truly save the day when a small emergency strikes! When shopping by price, most companies won’t include these “save the day” coverages because they want to provide you with the cheapest possible coverage!
The saying is true: “YOU GET WHAT YOU PAY FOR” All too often people pick a price for their coverage and only realize at claim time that what little coverage they paid for is not very helpful. Asking questions about car parts, liability, actual cash value, and deductibles will help you to get affordable coverage that protects your assets!
Reference:
“Price Shopping Can Cost You Coverage.” Home, Auto, Business & Flood Insurance Solutions. Selective Insurance Group, 08 July 2016. Web. 28 July 2016. <https://www.selective.com/info-center/resource-center/for-your-information?news=price-shopping-can-cost-you-coverage>.