Life & Accidental Death: Getting the Most for Your Insurance Dollar

Even for those “born to shop,” insurance seldom tops the list of favorite purchases. For less enthusiastic buyers, the thought of calling an agent and sitting through a session of “deductibles,” “exclusions,” “riders” or other insurance jargon can seem intimidating.

Further, insurance protection is an intangible benefit. You usually don’t collect on your investment until tragedy strikes—whether it’s property damage, injury, illness or death. Although many consider insurance necessary, it is seldom understood. As a result, consumers often buy insurance without adequately planning or even understanding what the marketplace has to offer.

Although insurance can be purchased directly from some insurance companies, most is bought through salespersons, either agents or brokers. The California Department of Insurance licenses insurance salespersons and regulates their practices through the California Insurance Code so that unfairness and deception are illegal. Unlawful actions of salespersons can result in suspension or revocation of their license. But the facts remain that many sales techniques are not illegal and salespersons will continue to use them. It is in their financial interest to do so, and it is unrealistic to expect otherwise. In order to retain control of the transaction, you, the consumer, must prepare yourself to buy only the insurance you want and need.

Here are some common sense tips put together by John Glickman, a Montgomery County, PA car accident lawyer,  to help you successfully complete your insurance transaction through care, planning and effective participation in the sales process:

Decide what you want to buy. Don’t leave the decision to the salesperson

List the points that are important to you in buying insurance, such as coverage and price

Find out what insurance products are available to cover the points on your list:
Read books and magazines and talk with several insurance salespersons. For example, auto insurance can include liability, collision, comprehensive, theft and medical. Not everyone wants or needs other types of coverage.

Also, life and health insurances are available on a group basis through many employers, unions, and common interest organizations. Compare the price and coverages of these plans, if available, to what you can buy individually. Generally, group plans are much cheaper than individual plans, but coverage and benefits terminate when your job or membership in the union or group ends.

Consider the amount of insurance you will need:
For property insurance, replacement cost is a good benchmark. In liability insurance, which covers legal responsibility for specific occurrences, the amount needed is more difficult to determine. Factors influencing the face value of life insurance purchased include survivors’ needs, assets such as property and income, life-style and debts.

Determine your price range:
The insurance you want may be more expensive than your projection, but you will find significant price variations by comparison shopping. Also, you may be able to achieve your price range by making adjustments in the coverage you buy. Most policies have maximum limits, deductibles and optional coverages. As these change, so does the price.

Shop around for the best premium:
Prices vary considerably, so it pays to compare several companies’ rates. However, keep in mind the axiom “you get what you pay for.” Be sure to meet your list of important points. Review and compare all quotations to determine if the coverages, deductibles and limits are similar to each other.

You should also be aware that agents and brokers, in certain circumstances, are permitted by law to share a portion of their sales commission with their customers.

Shop around for service:
If possible, deal with companies, agents and brokers known to give the level of service that meets your needs. Consult with knowledgeable friends and respected advisors for recommendations based on their experiences.

Be aware that salespersons may not charge fees for advice or insurance related services unless they are licensed as Fire and Casualty Insurance Brokers. Any fees charged in such cases must be disclosed to the customer in advance. Keep in mind that any salesperson has a financial stake in what you buy. Thus, you may also want to seek the advice of someone with no sales commission at stake.

Do research on benefits:
You may not know exactly the different types of insurance available when you begin. For example, life insurance products and their prices vary dramatically. You should hear several proposals from different salespeople and insurers before you have enough information to make an informed decision.

Do research on insurers and salespeople: Purchasing insurance can be complicated. Choose both the insurer and the salesperson with care, as you would any professional (such as lawyer, accountant or realtor).

Many sources of information are available to find out how an insurance company or agent has performed in the past. The Department of Insurance licenses people and organizations in many industry specialties including: insurance companies, life and health insurance agents, fire and casualty insurance agents, fire and casualty insurance brokers, fire and casualty insurance solicitors, life insurance analysts, bail agents, insurance adjusters (both independent adjusters representing insurers and public adjusters representing claimants), insurance administrators, and surplus line brokers (who are allowed to advertise and offer coverages of certain unlicensed insurance companies which have products that the normal market-place may not offer).

All these licenses may be checked for current status and type, address, and information about public disciplinary and regulatory actions taken by this Department. Insurers submit quarterly and annual financial statements which the public may also review at Department offices.

Other resources may be consulted, including:

Friends and advisors:
Some of the best sources of information are people you know and trust.

Best’s Insurance Reports: 
This publication, available at your local library, rates insurers on their financial condition and policyholder treatment.

Department of Insurance publications:
The Department publishes a series of consumer guides, comparative insurance premium surveys and company complaint ratio studies on various classes of insurance, such as automobile and homeowners. Many of those publications are available on-line. For a complete list, see the brochures list.

Consumer Groups and Magazines:
There are consumer and public interest groups at local, state and national levels which provide useful information. Check your local phone directory for listings. Consumer magazines also rate insurers and offer advice on buying insurance.

Better Business Bureau:
This business organization, among other things, monitors consumer relations records of its member businesses (including many insurance companies and agencies).

Court records:
Through these you may see if the person or company has been sued successfully and the issues involved in the case.

Carefully research the proposals you receive. If necessary, consult your attorney or accountant for legal, financial and tax advice. During the sales process, you might be given information and opinions by the agent or broker. There is no substitute, however, for consulting with your own advisor. In fact, it is often unwise to rush into a transaction without taking time to consider the advice of those on whom you normally rely for guidance.

Document and understand your transaction:
Any promises made to you about future costs, benefits, or coverages should be made in writing. Ask the agent to show you where these promises appear in the policy when it is delivered.

Obtain copies of everything you sign. Obtain receipts for any payment you make. Never pay in cash. All checks should be made payable to the insurance company, not the agent. Be sure all receipts and checks show the policy number and the name of the insurer receiving payment. Any receipt should also be signed and dated by the representative receiving the payment from you. Keep receipts and cancelled checks in a safe place for the duration of your policy as evidence of payment.

If you pay by money order, keep in mind that in disputes it may take some time to verify payment, since you’ll need to obtain copies of the front and back sides of the money order from the company or business that sold it to you.

Be careful in the use of premium financing. Agents and brokers are not required to help you arrange to pay for your insurance on a monthly basis. However, they do have access to organizations that will allow you to pay for your insurance over a pre-set period. These organizations charge for this service. And it can be expensive, especially if you or the insurer cancel the policy early.

A separate loan contract will exist between you and the financing organization. You’ll be expected to pay even if you are unhappy with the insurance. Generally, the bank or financing organization will have the right to cancel the policy if you’re late with or miss a payment. Be sure you understand the terms and conditions before you agree to it.

You may also want to explore less costly means of financing. For example, some insurers accept credit cards, which may have lower interest rates than those charged by premium financing companies. Also ask whether the insurer has a program allowing you to pay by the month. Sometimes these are available for a small service charge.

When illustrations or proposals are shown to you, request copies so you may study the proposal or illustration at home without pressure. This way, you ll get a better understanding of what your insurance program is designed to do.

Make a list to be sure your important points are covered. Many consumer complaints arise because the buyer did not understand the coverages or limitations proposed for the policy. The unprepared consumer may not realize that the policy ordered fails to meet his or her assumptions regarding provisions such as waiting periods, deductibles, policy limits, premium payments, or optional endorsements. All of these vary from insurer to insurer. If you make assumptions, you may be unpleasantly surprised.

Keep in mind that only the insurance company has authority to change insurance policy provisions. Be suspicious of any salesperson claiming to have this authority. Get any promise in writing. If in doubt, contact the insurance company to verify information.

Review the policy as soon as you receive it:
The insurance policy is the written agreement between you and the insurer. The sound advice that the buyer should read the policy is breached all too often. The Department receives many complaints from consumers who purchased a policy, then put it away upon arrival without reading it. Later, they discover that the policy does not cover what they thought it would. If substantial time has passed, it may be too late to do anything about it. Most insurance companies are not willing to retroactively change the policy, especially after a loss has occurred.

Also, some policies provide a “free look” period (10 to 30 days after delivery) during which the buyer may cancel for a refund by writing directly to the insurer.

The only way to be sure that the contract between you and the insurance company is what you ordered is to read the policy as soon as it arrives.

Some Final Tips:
The purchase of insurance is one of the most important business or personal transactions you are involved in. Your financial future, and that of your family, may depend on the policies you buy. Smart shopping takes time and effort. But the rewards are increased understanding of the insurance you have, more control over what your insurance will do, and the peace of mind that will result.

Finally, here are some suggestions to help you effectively use the services of an insurance salesperson:

1. Do plan your purchase.
List points regarding coverage and price that are important to you in buying insurance.

2. Do shop around.
Compare the products and services of several insurance companies and salespeople.

3. Do check credentials and qualifications of those with whom you deal.

4. Do ask your friends and neighbors about their experience with insurers and salespeople to compare price, coverage and service.

5. Do keep copies of all illustrations or proposals shown to you.

6. Do make your own decision.
You, not the salesperson, must make the final choice on what you need and can afford.

7. Do get any promises regarding coverage or policy provisions in writing.

8. Do get a receipt and keep it for the time the policy is in force.

9. Do read the policy as soon as you receive it to make sure it is what you ordered,
If changes are needed, contact the salesperson or insurance company immediately.

10. Save the policy for three to four years.

11. Don’t be rushed or hurried by high-pressure sales tactics.
Buy only the insurance you want and need!

12. Don’t assume that a salesperson has thoroughly surveyed the insurance market to find the best or cheapest policy for you.
Some salespeople work exclusively with one insurer. Others represent only a few. Do your own research and make an informed decision.

13. Don’t borrow from a premium finance company without fully understanding the terms and conditions of the contract.

14. Don’t let the agent keep the policy for you.
Keep it yourself in a safe place so you will have it when it is needed.