FRIDAY, OCTOBER 28, 2016
Can we agree on something? We Americans love a good deal. Whether it's spending five more dollars to get free shipping (thank goodness for Amazon Prime!), or buying in bulk, or double coupon day, or just taking advantage of a good sale, many people find their chest puffing with pride when they get to tell their friends, family, or coworkers about that great deal they just got. Shopping your insurance is no exception - as an insurance agent especially, people love telling me how great their rates are, whether I was involved in the process, or if they got their great deal elsewhere. Make no mistake, shopping your insurance can certainly result in very real savings. Like many other big purchases, though, it pays to be smart about your choices. I'd like to share with you a few mistakes to avoid making when it comes to your insurance.
Only paying attention to what comes after the dollar sign.
Obviously, freeing up dollars in your monthly budget is a HUGE motivator for considering switching your insurance. There's a reason so many insurance companies exist at so many different price points, though. Saving money may make your heart skip a beat and send you into daydreams about how you'll use the extra cash. But don't lose sight of what's important. Cheaper does not always equal better. Could those savings be costing you valuable coverage, only to find out too late you're left with huge coverage gaps? Does that low-priced quote leave you with lower limits than you already have? Might you be giving up protection afforded by your current insurance that this new insurance carrier didn't include, or maybe doesn't even offer? Does that low-priced policy introduce new exclusions, or might you be spending additional days or weeks waiting out a claim that would've already been settled by your existing insurer? Be sure to pay close attention to any proposal you're presented with. Don't let a few hundred dollars saved today become several thousand lost later.
Purchasing too little coverage
There's no denying we could all use a few extra dollars in our pocket at the end of the month. Make sure that doesn't translate into being penny wise and pound foolish. Don't get sucked into cost-cutting measures like maxing out your deductible or lowering your limits of liability. Oftentimes, these practices might only save you single digits monthly, but could cost you significantly should you be faced with a loss. Don't forget, you're not only protecting your valuable property from accidents, damage, or theft, but you're also protecting your assets and net worth from your own potential mistakes. That five dollars a month could mean the difference between being sufficiently covered and losing your home. You're purchasing insurance because you don't like taking chances - so don't roll the dice.
Buying too much coverage
On the other hand, it's not difficult to take the other extreme - buying up all the coverage you can possibly get. While there are often lots of options to add additional coverages to your policy for mere peanuts, make sure you're being intentional about what you choose to buy. Having a low, low deductible can afford you peace of mind come the unthinkable. But be sure to consider opportunity costs. How long do you have to be claim-free before the additional premium costs you more than the deductible would have? What would your insurance carrier actually pay you for that 25-year-old car you've got collision coverage on? How many times will you pay them for your car in the hopes one day they return the favor? Break out the calculator and figure out how long you'd spend paying your own savings account instead of the insurance company to realize the same financial benefit. More coverage can often be better for your circumstance. But sometimes, it isn't.
Buying insurance online
Give the credit where it's due: there are marketing teams who are extremely effective when it comes to making their brand instantly recognizable, and others still who intentionally make their product simpler to buy than a pack of gum. It can be tempting to make an emotional decision, or just do what seems easy. And who could ignore the claims that a handful of minutes could save you a corresponding number of percentage points on your premium? What do you give up by making these sort of purchases? Did you really understand what you just paid for? Are you certain you got the best value, or are you just taking some mascot at their word? Where will that cute animal or witty spokesman be when that tree falls on your car, or when that frying bacon begets uncontrollable flames?
If I asked you to define certain insurance terms, could you do so accurately? Do you understand the difference between replacement cost and actual cash value? Could you explain what a coinsurance provision means for your homeowners coverage? What are you missing out on by declining mechanical breakdown coverage? Do you know when water damage is considered flood, and when it isn't? Making online purchases might make your life much simpler when buying Christmas gifts during the holiday season, but don't rely on hearsay when it comes to protecting what matters to you the most.
Relinquishing freedom of choice
Those really effective marketers did more than ingrain a commercial in your mind. They've built perceived value into their brand by heavy repetition. And please don't misunderstand - I don't mean to imply that the instantly recognizable household name in the insurance world can't possibly be the right choice for you. Sometimes, they are - otherwise they wouldn't stay in business. But I know all too well it can be easy to simply accept the first proposal put in front of you because the brand gives you a warm, fuzzy feeling. Every insurance carrier has their own unique set of guidelines to define the customer they are after. So talk to one or two of the big names if you want. But make sure to consult with a local independent agent who can present you with choices rather than just telling you what they think you need at a price they hope you think you can afford.
Not asking questions
I get it. No one wants to go eye-to-eye with a salesman and get the hard pitch. It's uncomfortable. Just remember: a valuable insurance agent isn't just selling you a piece of paper. They are a wealth of knowledge and experience who should be considering your goals and desires when presenting you with your insurance options. Take advantage of what your agent can offer you. Most professionals charge you a fee for their time - your agent can help you fully understand your insurance and manage your risk with no hourly rate. He or she wants to help you achieve your goals. Make sure you know what you're getting into, and be confident that when you make your choice, you did so fully informed.
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