October 7, 2009, 5:00 am

Knowing more about Insurance: 15 questions and answers to help you see through your insurance coverage: part 2

by: The Financial Blogger    Category: Insurance
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Yesterday, I had outlined 7 questions about insurance. Today, we are looking at 8 more interesting questions you may have about insurance coverage:

8. How can I ensure that I’m making an apples-to-apples comparison if I’m price shopping among several companies?

A:  Your agent will be the biggest helper in this situation. He will actually play the role of “translator” to make sure you understand complex insurance terms. You will probably have to ask a lot of questions to make sure you understand. Don’t be afraid to ask, it’s the agent’s job to answer!

One more point: there is no free lunch in finance, nor with insurance! If there is a huge difference in the insurance premium, there is probably a huge difference in the coverage!

If you need third party advice, there are good associations that provide people with assistance such as the Insurance Information Institute; and industry experts like Ben Baldwin, who wrote The Complete Book of Insurance. There are other personal finance experts who may also be helpful.

9. How can I make sure that my insurance decisions fit into my overall personal financial picture?

A:  Your agent should help a lot with that.   If you have multiple lines of insurance or even other financial services products with State Farm, your agent can help you to see the big picture – understanding your total financial situation.   It’s also absolutely critical that as you evaluate your overall situation that you think about how your individual insurance policies fit into your preparations for financial emergencies – and you should look at it across policies, including auto, health, etc.   Understand what your deductibles and other out-of-pockets could be and do your best to have an emergency fund that takes those factors into account.

10. What is the impact on me if I file a claim?  Explain to me why my policy goes up when I make a claim?  How is this protecting my financial needs if my insurance company raises my premium?

A:   Statistically speaking, if you have an accident, you are more likely to have another compared to an individual who never had one. This is why your premium can increase after an accident. However, depending on your client status, you might benefit from insurer “forgiveness” and have a “free” accident.

11. What are the most overlooked discounts that are relatively easy to get?

A:   Discounts that are tied to changes in your life or behaviors are probably the most often overlooked.   Things like a student going away to school, students with good grades and safe driving records can all help you qualify for a discount.   Multi-car and multi-line (having auto and homeowners’ or renters’ insurance) discounts are also important to keep in mind.

12. How frequently should I review insurance policies to ensure they are up-to-date and meet my needs?

A:   As a rule of thumb, I would suggest once a year. Your contracts usually renew on a yearly basis and it allows you to contact your insurer in order to let him know about any changes in your life (getting married, finishing school, moving, having a baby, etc.). Your insurance agent will tell you if your new status should affect your insurance coverage or insurance premium.

13. How can I tell if an insurance agent is being “straight” with me, or just trying to sell something else?

A:  I’d say that your best bet is always to shop around the first time you are about to purchase insurance. Get 2 to 3 opinions and ask each rep why you received a different proposal than the other. Also, ask them how they are compensated. By law, they have to tell you how they are rewarded when selling insurance. They don’t have to tell you how much, but they sure have to disclose if one policy pays more than another… that is, if you ask ;-). Since State Farm offered me a lot of information to write these 2 posts, I must mention that they said that their agents only sell State Farm policies, therefore, they are non-biased in their product offering process.

14. Do my kids get a discount when they buy a policy with the same company that I have been with for years and years?

A:  State Farm along with many other insurance companies offer a teen driving safety certification that can carry a pretty significant discount.

15. Will a poor credit rating influence the coverage I qualify for and my premiums?  How do I know if an insurance agency is investigating my credit report?  Is that legal?

A:  That’s a great question for your agent.  The laws vary by state.   Good organizations to reach out to for more information are the Insurance Information Institute and the National Association of Insurance and Financial Advisors

In Canada, they actually have to ask for your permission to conduct a credit investigation. You are allowed to say no, but you could benefit from additional discounts, if you have a great credit score. 😀

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It is important to note the difference between insurance agents: captive insurance agents can only represent one insurance company while independent agents can work with many different companies. It is much better to work with an independent agent because they tend to be a lot more objective and can help you compare many different options.