It Pays to Shop for Best Home or Auto Insurance
People may spend months looking for the right house or the best car, but many spend little time, if any, shopping for insurance.
“Most people don’t know what they are buying,” said Jeanne Salvatore, a spokeswoman for Insurance Information Institute, a consumer education group. “They don’t read the contract or ask questions.”
Actually, much insurance is straightforward. Most states have specific requirements for home and auto coverage, and many insurance companies offer basic coverage that fulfills those requirements.
Nationwide, the average annual premium for homeowners insurance was $420 in 1991 (the most recent year for which numbers are available). This generally covers a house, personal possessions and $100,000 of liability. About seventeen events are covered by insurance, including theft, fire and windstorm damage.
Earthquake or flood-related damage is usually excluded. A special policy would be required, and this could be costly.
The Insurance Institute suggests consumers check their existing policy to make sure they are covered in the event their home is completely destroyed or burglarized. The Institute also recommends a home be insured for 100% of the cost of rebuilding it and include an “inflation guard clause” that would automatically adjust the limit when a policy is renewed to reflect costs in your area.
“Spend time shopping around. Ask friends, relatives, co-workers. Ask if they are happy with their agent and ask, if they’ve filed a claim, what happened,” Salvatore said.
Contact three or four agents or company representatives. Describe the kind of policy you are looking for. Ask what it will cost. Make sure you give the same information about yourself so costs can be compared.
Don’t hesitate to say you are still shopping and aren’t ready to make a decision.
In addition to providing service and the kind of policy you want at the right price, the insurance company must be financially sound and reputable. The Institute advises that consumers check with rating companies, such as A.M. Best & Co., which is available in business libraries and rates insurance companies for financial stability.
According to the Institute, the easiest way to keep costs down is to keep the deductible high enough so you are paying for “affordable” losses yourself. This way, insurance pays for the big losses, the ones you can’t afford.
Standard & Poor’s Corp. also rates insurance companies. Its information is available free of charge.
Consumer Reports magazine provides an annual survey of insurance companies. Also, state departments of insurance can tell you whether complaints have been filed against a company.
As in any purchases where there are many salespeople and companies to choose from, if an agent doesn’t explain something to your satisfaction or respond when needed, try another.
“There are plenty of companies and good agents to choose from,” Salvatore said. “A good agent will force you to think about your policies and needs.”
There are ways to keep the overall insurance costs lower and a good agent will explain how. Again, if the agent doesn’t or won’t, look for someone who will.
