How Do You Find the Right Insurance Company For the Right Price?

You could shop on the Internet for insurance. There are numerous sites that have price quotes for auto, homeowners and life insurance policies. But what coverage is available under these policies? And how can you be sure that you’re buying enough coverage?

You could look in the telephone book and find dozens of companies that sell auto, homeowners and life insurance policies. You can call each of these companies and talk to one of their employees.

But does this person know your insurance needs? Can he or she assess how risk-averse you are based on a fairly short phone conversation? Does this person even have a license to sell insurance? And how can this person work for you when he or she is working for the company? Can you imagine a sales representative saying to you, “Frankly, I don’t think we have the kind of coverage you need?”

You could call an insurance agent who represents one insurance company. These companies -- State Farm, GEICO, USAA, Farmers, the Auto Club, etc. -- are fine, financially sound insurers, but what if they don’t have the coverage you need at the price you want to pay? The agent doesn’t have any options for you. He or she represents just that one company.

* Tip. Best Option: Select an independent agent who is not bound to just one, single company.

If you want the best in terms of coverage options and prices, you should call an independent insurance agent. Independent agents represent numerous companies, each of which has a broad range of product offerings. These agents do derive their income from their companies, but they are not employees of any insurer. Independent agents are just that.

Once they assess your insurance needs, they can then find the company they represent that has the coverage that best suits you, at the price you are willing to pay.

About price -- it’s not everything. Cheap doesn’t equate to good. Unless you have few assets to protect, the lowest-priced policy is rarely the best deal for you. This doesn’t mean you need to buy the highest-price policy, either. Think Value. How much are you getting for what you’re paying?

* Tip.  Also, be aware that insurance companies are always hungry for policyholders who drive safely, have safe cars, live in new or refurbished homes, and are health-conscious. Insurers offer a variety of discounts.

Does your car have airbags, antilock brakes? Discount. Is your teenage son or daughter who drives your car(s) a good student? Discount. Does your home have an alarm system? Discount. Are you a nonsmoker? In good shape? Discounts for life insurance. Your agent can make sure you are getting all the discounts you are entitled to.

* Note. Your overall insurance program for you, your family, your home(s), your car(s), your assets, your career, even your life, will probably have several components. Most states require you to have auto insurance with at least minimum liability limits. Your mortgage lender will require a homeowners policy. Everything else is basically optional.

Ultimately, you will decide what to protect with insurance and what risks to assume yourself. In the next few chapters, we will examine the various personal insurance policies, including what they cover and what they don’t.

How Much Insurance Is Enough? It Depends!

While it’s one thing to have insurance for specific risks, it’s quite another matter to have enough insurance. How much is enough? The answer is different for everybody. It depends on what you want to protect and how much risk you’re willing to assume yourself.

Let’s say you have a net worth of $1 million. (Congratulations, by the way.) That’s the total value of your various possessions: home(s), car(s), furniture, art, stock and bond holdings, mutual funds, etc. One million dollars is also how much you have to lose.

* Imagine this.  Say that famous person you hit in the intersection sues you for loss of income, pain and suffering, etc. Basically, the most this person can get from you is . . . $1 million.

Let’s say your current auto insurance policy has a limit of liability that will pay a maximum of $100,000 to any one person involved in an accident with you. (That’s a pretty common limit, by the way, although not for people with seven-figure net worth.) If you’re sued for $1 million, your auto insurance will pay a maximum of $100,000, which leaves you holding the bag for $900,000.

Ideally, your liability insurance limits should come close to matching your net worth. After all, someone can’t sue for something you don’t have. You may be willing to assume some risk here, believing that you’re very, very unlikely to ever be sued for anywhere near you’re net worth.

* Tip. Remember that your net worth is basically a target for attorneys representing someone who has suffered injuries, lost wages, and had pain and suffering as a result of something you did. In addition, it can cost only a few hundred dollars more a year to have a liability limit of $1 million as opposed to $100,000.

In deciding how much insurance to buy, you must consider what you have and what it costs to provide the level of coverage you’re comfortable with.

Keep in mind that most people who have significant assets and decent incomes can afford to purchase liability limits high enough to equal their net worth. Whether they choose to is another matter.

Protect yourself from fire and fumes

Wouldn't it be just great if we could build totally fireproof homes? I mean, building materials, furnishings and clothing that just didn't burn. Technically, I suppose it's possible but it'd cost you a small fortune. And since most of us can't go that route, let me tell you about the four things I've done in my home – bearing in mind, the most important thing in any home fire is the safety and survival of the occupants.

1.      Installed fire/smoke alarms (a few dollars each) in all main rooms and hallways, and I check batteries regularly. If you already have them and they're more than 10 years old, I recommend you replace them.

2.      Bought a fire escape ladder that I keep on an easily-accessible shelf on the landing, in case fire traps anyone upstairs. If you buy one, make sure everyone knows how to use it!

3.      Placed a fire extinguisher in an entry-way closet. This only works if you take the time to learn how to use it (and what sort of fires it works on), regularly replace it, and use it only to tackle small fires – and then only AFTER calling 911.

4.      Developed a simple fire safety and escape plan that I discussed with my family. The number one rule: Get out of the house and stay out. My plan included talking to my kids about fire dangers and appropriate behavior. See the next chapter for more on this

You can pick up some more useful tips on fire safety at home at firesafety.gov.

By the way, you may find that your local fire department offers free home checks and even free or cheap alarms.

You should also install at least one carbon monoxide alarm in your home (preferably near the bedrooms), which will pick up on fumes from furnaces, fires, other appliances and vehicles that reach a danger level in your home.

Positive Changes in the National Flood Insurance Program

If you missed the big changes in the national flood insurance program last month you were not alone. As the country watches the Democrats and Republicans duke it out over the coming primaries some productive legislation happened with regard to flood insurance.

On July 6, 2012 President Obama signed the Biggert-Waters Flood Insurance Reform Act of 2012 extending the National Flood insurance program through 09/30/2017. The act is more than the usual kick the can of problems with the NFIP down the road for a few months or another year. This act overhauls the program which I hope puts the flood insurance program back on a strong financial footing.

One of the biggest changes in the NFIP is the phasing out of subsidized rates on properties with more than one loss. That might seem like common sense to most laymen but the concept has been lost on the NFIP for decades. We will see more dwellings that will be able to participate in the FEMA buyout program whereby high-risk locations with dwellings can be purchased and abated. FEMA will now be able to purchase re-insurance on behalf of the NFIP and be proactive in transferring risk. A mapping advisory council will be established to help FEMA modernize its flood mapping. This is crucial as many of the country’s high flood risk communities have inadequate mapping.  For the first time private insurance will be allowed in lending. In the past only government backed flood insurance was allowed in mortgage applications where flood insurance was required. Watch for greater rate increases in flood rates over the next several years as the NFIP tries to match rates to losses and become self supporting. One of the changes in the Flood Insurance Reform Act allows for an annual premium cap of 20% which will allow the NFIP to take greater rate increases. The deductible for flood insurance in preferred risk zones will be increasing from $1,000 to $2,000.

If you are getting the picture, flood insurance will become more expensive over the next several years and while consumers will not be happy, the changes will allow the NFIP to continue in the future as a legitimate insurance program and not a societal benefit that our country cannot afford. Without a government backed bailout after the Hurricane Katrina disaster of over $18 billion dollars the NFIP would have collapsed. As the program becomes more financially sound it should be able to better withstand future catastrophes and support an action plan to repay the debt to the US government.

Perhaps one of the most profound changes is an amendment introduced by Senator Roger Wicker (R – Mississippi) that uses data from the National Oceanic and Atmospheric Administration (NOAA) and FEMA to assess the cause of water damage following a hurricane. The point of this amendment helps determine water and wind damage faster and with greater accuracy. If you recall post Katrina it was the courts that were left to determine if a loss was due to flooding or wind driven rain. Now, dwellings that are damaged directly by wind driven rain can be routed to their homeowner insurance carrier and a faster claims response.

The Biggert-Waters Flood Insurance Reform ACT doesn’t resolve all of the NFIP issues for long term sustainability. However, with the caustic political environment in Washington it is refreshing to see a bipartisan effort to strengthen this very important federal insurance plan.

Protect Yourself From ID Theft

I just spoke to a friend of mine that has discovered someone on the East Coast is using her identification and has used credit in her name. ID Theft is exploding throughout the country and the losses hurt in more than just a financial sense. Most states in this country are credit states which means they use your credit score to determine your cost for insurance, interest rates you pay on a loan or your ability to get credit. So, even though you are not at fault, you can prove that you are not at fault and the source of the complaint acknowledges that you are not at fault it can still affect your credit score.

To get an idea how big a problem this has become, over 10 million people in the United States discovered that they were victims of identity theft last year. ID Theft is used in financial fraud to steal from your bank accounts, your credit cards, your social security payment, your IRS tax refund and more. ID Theft is used in criminal activity to use your identity to commit a crime, enter another country, get special permits or commit acts of terrorism.

You can limit your risk of Id Theft by through prevention:

1.            Be extremely protective of your PIN number when you are using an ATM

2.            Change your passwords frequently and don’t use the same password for all of your accounts

3.            Shred credit card receipts. Don’t just tear them up, buy an inexpensive shredder and shred the  documents.               

4.            Don’t leave your mail in your mail box for extended periods of time. If your mail box is unsecure consider getting a post office box or a mail box with a clocking container.

5.            Know who you are giving your credit card information to

6.            Run your free credit report each year and review to make certain that all of the records reported are yours. http://www.ftc.gov/bcp/edu/microsites/freereports/index.shtml

7.            Review your credit card statements and note any suspicious charges. Do the same thing with your bank statements.

8.            If you lose a credit card report it as stolen immediately.

If you discover that you are the victim of ID Theft here are some steps that you can take to prevent the loss from costing you money and damaging your credit.

1.            Keep a complete record of how you discovered the theft and the steps that you took.

2.            If the theft was more than a $1,000 report it to the local police. You will need a police report when working to get your money back and limit your liability.

3.            Report your theft to the Federal Trade Commission at  

http://www.ftc.gov/bcp/edu/microsites/idtheft2012/

4.            Order a credit report immediately and check your credit:                 http://www.ftc.gov/bcp/edu/microsites/freereports/index.shtml

5.            Contract each of the three credit reporting agencies to report the theft:

Trans Union       Report fraud      800-680-728

Order copy of report:     P.O. Box 390       Springfield, PA 19064      Or call: 800-916-8800

Dispute information in report:
Call number provided on credit report or use "investigation request form" provided by TransUnion when you order your report.

Opt out of pre-approved offers of credit and marketing lists:      800-680-7293

Equifax:              Report fraud     800-525-6285

               

Order copy of report: P.O. Box 740241, Atlanta, GA 30374-0241 Or call: 800-685-1111

Dispute information in report: P.O. Box 740256, Atlanta, GA 30374-0256 Or call the phone number provided in your credit report

Opt out of pre-approved offers of credit: 800-219-1251 (California only) Or write: Equifax Options, P.O. Box 740123, Atlanta GA 30374-0123

Experian:             Report fraud:     888-397-3742

By mail: Experian National Consumer Assistance Center P.O. Box 9530    Allen, TX 75013

Order copy of report:     Experian National Consumer Assistance Center P.O. Box 2002    Allen, TX 75013  Or call: 888-397-3742

Dispute information in report: Contact Experian at address and phone number provided on your credit report

Opt out of pre-approved offers of credit:   Call 888-567-8688

6.            Place a security freeze on your credit file to prevent additional ID Theft

I hope that you don't need to go through this process as it is painful and time consuming. However, the odds are that you will experience ID Theft at least once and it is important to know what steps to take. There are a number of services that you can subscribe to help prevent ID theft and will help you get back on your feet if you should become a victim. Also, most homeowner's policies have some minimal coverage that can be added on to the policy. Talk to your agent to find the service and coverage that will work best for you.

Is a Sewer Backup Claim Covered Under My Homeowners Policy?

There is no clear answer when a toilet overflows whether the homeowner’s policy will cover the damage. Generally, when a toilet backs up because of a “reverse-flow” from overloaded public sewer lines the damage is not covered because the cause of loss is excluded in the homeowner’s policy. If you wanted coverage for this type of loss you would purchase a water/sewer back up endorsement for building and contents. You select the amount of coverage you desire (generally in increments of $5,000) to add to your existing homeowner’s policy.

Who is at greatest risk for a water/ sewer back up claim? Those homeowners that live in coastal regions at or below sea level or along river plains that are subject to flooding. Also those homeowners that have a toilet attached to a community sewer that is on a concrete slab.

Talk to your insurance agent for more information and whether this important coverage is necessary for your home.

The Soft Market is Over!

Officially, the Soft Market was declared over in November 2011. In the insurance industry the markets cycle between soft and hard based on available capacity. It is even possible to have cycles within a specific niche of the market that run counter to the overall industry. The soft market began sometime in 2005 and has been one of the longest running in the past century. During the soft market rates for personal and commercial lines were depressed based on excess available capacity in coverage by insurance carriers. This led to stagnate premiums and in some cases lower premiums among some carriers specifically in the commercial industry. Even though the economic bubble burst in the homeowners market in 2008 the insurance industry was recording a slow down as early as 2005. This led to a false sense of security among policy holders and agents that during the recession insurance premiums would remain stable.

Now that the industry has resolved the extra capacity with companies leaving specific markets and tightening underwriting objectives we will begin to see a hardening market with increases in premiums across the board. We are already seeing rate increases among homeowner’s policies nationwide and in specific commercial segments. As time goes on we will also see rate increases in auto and many of the ancillary coverages in personal lines. This will prove a challenge for policy holders and agents as the public struggles with incomes that are still most flat from the recession and higher insurance costs. I am not advocating that you should move your insurance at each rate increase as that would be counter intuitive to your long term goal of getting the best coverage for the premium paid. However, it is important to know where you stand within the market and your insurance agent should be communicating with you at least every 24 months as to how you compare and what your options are.

Why I Believe In Insurance Agents

With all of the questions regarding the relevance of insurance agents in the modern era of the internet here is a powerful testimonial in why I believe in insurance agents:

How An Added Homeowner’s Coverage Can Protect You For What You Say!

If you explore all the options with social media and participate in conversations with any regularity you know that sometimes what you meant to say on Facebook, a Tweet or in an E-Mail is taken by someone else differently. Sometimes this leads to hard feelings which can be corrected with an apology. Sometimes it leads to a lawsuit that results in the expense of hiring and attorney to defend you. The reason that I am pointing out social media is the thought process and implementation is so much faster than placing a printed letter. It is much easier to communicate what you are thinking online and hit send than it is to type a letter in a word processor, review and mail. Mistakes happen and comments are made that can lead to offense and after you hit send it is impossible to take it back.

It is hard to believe that there is a coverage that adds on to your homeowner’s policy that can extend liability coverage for things that you say and print that lead to libel, slander, defamation of character and invasion of privacy. The coverage is either called “Personal Injury” or in its more proper term “Personal Offense”. The coverage is not automatic, you have to have it added on and it ties into the personal liability on your policy. It is also not a silver bullet to protect you from all things that you say or print but for the price of $5 to $15 per year it is an excellent value.

Here is how it works: If you have $100,000 for personal liability on your homeowner’s policy you would then get up to $100,000 for personal offense. Hopefully, you are carrying at least $500,000 in personal liability (which I highly recommend to all my clients) – you would then have up to $500,000 for personal offense. Contact your insurance agent or insurance company for more details on this important but relatively unknown coverage and have it added to your policy.

How Does Credit Affect My Insurance Rates?

Insurance companies are increasingly using credit as a function of calculating risk for personal lines insurance. Insurance companies can do this because statistically they can show that credit has a correlation in claims. Several states have challenged credit as a factor in insurance rates however the courts have generally upheld credit as a statistical factor. What this means for the average insurance consumer is each company is creating greater breadth of tiering for their clients. Where a company may have had 10 to 15 rating tiers several years ago now has 50 to 60 rating tiers based in part on the credit level for each client.

Clients with lower credit scores will pay higher premiums than those with higher credit scores.

Unfortunately, this process hurts good people who pay their bills on time but have had a drop in their credit score because they took on debt due to a health emergency, lost a job, purchased a home, had a death in the family etc. I don’t see changes in this process anytime soon and I expect to see insurance carriers continue to expand their tiering structures to become more competitive in premium for those who are in the highest credit tiers. Another consideration is the older consumer who paid cash their whole lives and rarely, if ever took out credit. I realize that there are not as many of these consumers who were products of the depression era but I do occasionally come across them. They have no credit to speak of and may not be getting the best rates even though they are the most frugal of consumers.

Have you ever wondered who is really saving all that money in price comparisons shown on TV commercials and in the mail you receive? Those rates shown are based on the highest tiers of which the vast majority of the public do not qualify. For now, credit is here to stay and the best way to influence your insurance premiums is to protect your credit and credit rating. Be sure to request your free annual credit report each year and review it carefully. If you find any inaccurate information report it immediately. You can access your free credit report at:

https://www.annualcreditreport.com/cra/index.jsp

Homeowners Insurance Rates are Increasing

We are seeing rate increases from all insurance carriers in the Northwest for homeowners insurance. For years this category of insurance has been relatively stable and in some limited cases we saw rate reductions during the recession and soft insurance market.

Now we are witnessing the change in the marketplace to a hard market where excess capacity has been absorbed by insurance carriers and extraordinary natural disasters in 2011 nationwide that have forced insurance carriers to revise their rates by state. The Northwest is among the states with generally lower rate increases with the gulf coast and south eastern seaboard seeing the largest increases.

What this means for those of us in the Northwest  is there will be rate increases for homeowners insurance for the next several years as carriers adjust their rating models to compensate for higher than normal claims through increased natural disasters, thefts and vacancies.

As an agent I don’t advocate these rate increases and I do not have any control over them. I know they are coming and I want to prepare my clients with this information. It is important to make certain that each home is adequately covered however there are options that we can use to control insurance costs chiefly by considering a higher deductible. This is not for everyone but if you can afford to pay the first $1,000 of a loss or even $2,500 you can lower your insurance premium.

Now is a great time to meet with your insurance agent before your next renewal to discuss your coverage and insurance options.

Are Health Care Costs Slowing?

In a recent article by Lisa Gillespie in Employers Benefit News it was noted that health care costs were projected to increase less than 10% for the first time in the last 10 years! Costs for all types of medical plans on average are expected to increase only 9.9% for 2012!

One of the trends that I am seeing that lends to the article’s premise is the market is trading down in coverage. Insurance carriers are offering less rich benefit plans and more catastrophic plans to match the needs of individuals and group. Since most business groups and individuals have not seen their income increase to match the rate of health care costs they are more often than not struggling to keep coverage for their employees and for themselves as individuals. This has led to larger deductibles, larger copay and greater coinsurance requirements. We are seeing more restrictions on prescriptions namely forcing the use of generics instead of name brands and limits on visits to doctor’s offices. Ultimately, everyone who purchases health insurance either individually or through an employer bears the additional costs and that is not reflected in the lower increase in health care costs specified by the industry. So, are health care costs really slowing or is the consumer bearing a larger portion of the costs not reflected in the study?

Here's to Higher Limits!

During a recession everyone thinks about cutting back whether it is how much you spend on telephone, your cable bill, dinner out and of course insurance.  The TV ads tout that you can name your price and they will find coverage for you that will fit your price. What isn’t obvious is to get your price the insurance company is lowering your auto liability limits. Even if you haven’t subscribed to lowering your auto liability limits it would probably never occur to you to increase your limits for savings!

In insurance – just like real life, during a recession everything seems to cost more just when available cash on hand is getting tighter. If all costs are rising it also means cost to settle claims for losses and injuries are rising also.

If you are a good driver, have a clean record and good credit it may only cost you a few more dollars to increase your liability limits to the next level. For some it may not cost you anything and for a few it can actually save you money! Think of it as buying a loaf of bread and getting another for free. You are used to paying for one loaf and you notice that the loaf has increased in price. However, the store has an offer of buy one and get one free – now the cost of the one loaf doesn’t seem so bad. With auto insurance you are not really buying liability and getting more liability free but you can double your coverage and pay at a reduced rate which is some cases may be no more than what you are paying currently.

This opportunity is not something that you will see advertised but is certainly worth checking out. Talk to your agent and find out what it would cost to increase your limits and let me know your success.

The Coming Health Care Crash

With all of the conversation regarding health care reform and regardless which political party that you support health care and the insurance system that supports it in this nation is broken. While the inefficiencies in the current system continue to grow and more and more of the public fall in to the uninsured rolls we still have not reached the tipping point as a nation to proactively find a solution. Health care costs continue to grow each year faster than the rate of inflation and will continue as more of the boomer generation get older and use their health benefits. As an older segment of the US population depends on Group Health Plans, Individual Health Plans, Medicare and Medicaid we are seeing similarities in the insurance pool which also serves to drive up costs. Remember, insurance is all about spreading the risk so without the younger healthier members of society to drive the price down we will see premium rates grow at an ever faster rate. The boomers are only a part of the cause, as a public we are overweight, out of shape and taking medications more than ever – this is also driving up health care costs.

When the uninsured receive health care and pay little or nothing for the service those costs are being borne by the public who do carry insurance. You are paying the cost with every doctor’s visit, medical procedure and hospital stay. And, it is a self fulfilling prophecy because as more of the public become uninsured your share of the costs grow putting extraordinary pressure on the middle class.

When enough of the middle class can no longer support health care and maintain their family budgets we will see a crash similar to the financial markets and maybe that is not a bad thing. The short term fixes being proposed by both parties are akin to placing a Band-Aid on an amputation. It looks like something is being done but does not stop the hemorrhage. The United States only seems to make grand and sweeping changes when faced with no other choice. We need a grand and sweeping change to how we provide health care insurance in this nation and the political will from both parties and the American Public to see it through. I know that wishing doesn’t make it so and regret the lost opportunity now to have a national dialog on health care and a health insurance but realize that there is a process to all things and we are in a process with health insurance.

In the mean time and until the crash occurs I encourage all of my clients to not drop health insurance. Should you become sick or injured the financial repercussions can extend beyond your lives to impact your extended families. Everyone should have at least a catastrophic hospitalization policy. Now is the time to talk to your insurance agent to look at all of your options and keep insurance costs at a minimum.