Insurance, is there a more complex theme in personal finance than insurance? If you look at the furious battle of comments over my Primerica articles regarding insurance, you will see many points of view and terms (those guys brought the discussion quite far actually!). I had recently been contacted by State Farm who provided me with a list of 15 questions and answers about insurance. I have gone through the whole thing and posted a summary of the answers below:
1. How do I know that I’m getting the right amount of coverage for my situation – not overpaying for things or leaving me exposed?
A: – Find an agent that you trust with whom you feel comfortable. You should be able to find an insurance agent with qualities close to those of your trusted financial advisor. He should answer all your questions with clear and easy to understand language. You want to make sure you understand what you are signing for. In the best of both worlds, your financial advisor should be able to give you sound advice or refer you to an insurance agent that is trustworthy and competent.
– Then, shop around. It never hurt to shop around and meet with 2 or 3 insurance agents before making your decision. You will then see if your insurance coverage proposition matchs your needs (example: each of them provide similar proposals.)
2. What are the advantages of having different types of insurance policies (home, auto, life, etc.) with the same provider?
A: – Getting a big discount! I actually gathered all of my insurance policies with one provider and I was able to save a lot of money! State Farm actually offers a discount up to 40% on their insurance policies if you take all your insurance coverage with them.
– Since the insurance market is pretty rough, most insurers provide discounts if you have more than one car insured or they will offer loyalty rebate upon renewal.
– Dealing with only one insurance provider makes it easy and convenient too. Many times I see people in my office with their briefcase full of statements. They actually don’t even know what coverage they have anymore!
3. What disadvantages are there of having multiple insurance policies (home, auto, life, etc.) with the same provider?
A: There are not many disadvantages to having only one provider but the choice of which one becomes very important. Look for a company with a strong heritage, community involvement and a track record for fast and fair claim processing.
4. How can I understand what comprises a good policy for my situation under each of the insurance categories? Language is complex and difficult to understand.
A: The best way to determine the right policy for yourself across the different categories of insurance (home, auto, etc) is to speak directly with an agent in-person, make sure he/she knows your current situation and what security you’re looking to get out of a policy.
5. How does your company make sure that I can get smart, trusted advice if my personal situation changes?
A: This is a tough question to answer because it relies on trust. Your insurance agent should be available and offer you a client-focused service 7/24/365 to make sure you receive the proper support at any given time (Murphy’s Law dictates than something bad will happen at the worst possible time!) 8-(
6. What can I do to make sure that I get all of the discounts I’m entitled to?
A: Talk a lot! For example, State Farm says they have several types of discounts. To make sure you are eligible for all of them, talk about:
– Your driving experience (tickets, accidents, years of experience)
– Your marital status (married people get discount!)
– Your age
– Your neighbourhood
– How little you use your car
– Your credit score
– Potential insurance coverage
– Contract duration (I got a discount for taking a 2 year contract!)
7. Are there benefits to renewing with the same company when my policy ends?
A: Absolutely. For starters, you can save money. There are renewal discounts that can save you between 15% and 25%, and, at State Farm, the first one kicks in after just three years.
All right, enough insurance for today, I hope it helps you get your feet wet in the mysterious world of insurance coverage! Tomorrow, I’m coming back with questions 8 to 15!
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