Archive for category Basics
Is price all that matters?
Posted by Insurancedojo in Basics, General on May 15th, 2009
Nope. Remember, you buy insurance for times of need. You may hate to make the payments, but imagine how angry you’ll be if, after making all the payments, you can’t get anywhere on a claim. There are three key issues beyond price.
First, make insurance bets with healthy companies. A.M. Best and Standard & Poor’s company financial ratings are the standard. This is particularly important when establishing a long-term relationship, as with life, disability, or long-term care policies. Even if you’re buying a term life policy of short duration, you want any guaranteed renewability and convertibility promises to last indefinitely.
Second, you want top-drawer claims service. Low premiums is just the input side of the equation. If the output side is stingy and adversarial, low premiums can be worse than no premiums.
Insure.com is a good place to check complaint and lawsuit records for specific companies, as well as current news on industry disputes. Some state insurance sites provide useful company data. Texas may have the most consumer-friendly state site, with company information that could be of interest to non-Texans as well.
The third key to consider, beyond price, is actually about price (make sense?) and convenience. Many insurance companies will give you a great deal on premiums if you buy multiple policies from them. Also, when it comes to agents, premium payments, and company red tape, there are advantages to keeping things simple. If you’ve had good experiences with a particular company or if your search unearths a few companies that could cover the whole ball o’ wax for you, be sure to check for multiple policy discounts and compare quotes accordingly.
Where should I purchase insurance?
Posted by Insurancedojo in Basics, General on May 14th, 2009
We can’t tell you what insurer to choose, but we can tell you that you’ll be able to buy insurance almost anywhere, especially simple products such as term life insurance. The days of depending on a local insurance agency for everything are rapidly becoming a thing of the past. First off, Internet quote sites enable online insurance purchases. Beyond the impact of the Internet, recent changes in federal law have paved the way for banks and brokerages to get into the insurance business.
Depending on the type of insurance, your options will include some subset of Internet websites; telephone numbers for direct insurance companies (those that don’t work through agents); banks; brokerages; and celebrity-pitched, late-night TV offers. Of course, local agents are still an option — both independent (that represent a number of insurance companies) and representatives for a specific company.
Thanks to the Internet, you’ve got the latest facts at your fingertips and are entering the insurance transaction stage as a highly educated consumer.
Where should I start?
Posted by Insurancedojo in Basics, General on May 14th, 2009
It wasn’t too long ago that most people simply bought whatever insurance was mandated by the government and lenders, or recommended by insurance agents and friends.
Sure, diligent Fools have always purchased books and magazines on the topic, but given the pace of ever-present change, it used to be tough to get up-to-date information from all perspectives without actually spending more time and money than was saved by the effort. Nowadays, the Internet has it all, and most of it is free. By far and away, this type of comparison shopping is the activity in which the Internet has had the most dramatic impact.
Naturally, we think our Insurance Center is the top of the hill.
The sponsors of this area — you’ve probably noticed their banners down the side of this page — offer websites that are great for getting familiar with the market landscape at your own pace, without the sales pressure. They typically provide calculators for figuring your insurance needs and then provide free quotes on matching policies.
Even if you end up buying the insurance elsewhere, try out these quote sites first. (Heck, if you do end up buying from them, we’ll make a little money so we can pay some editors to slog through our site and fix all the typos!). As you click around, note differences between quotes and see what patterns you can find. What are the variables that have a high influence on price? Do rates vary widely across insurance companies? When you get some specific quotes, look for links to detailed policy information.
Also, by changing the input, you can see how different carriers rate health issues of concern to you. The more variables on the quote form, the more you can learn. As long as you don’t identify yourself, you should be safe.
One word of warning, though, never give out personal information like name, address, telephone, and especially, Social Security number on one of these quote sites, unless you are ready to purchase from a trusted source. There are plenty of sites that will provide information-only quotes based on age, sex, health, and medical information, or car and home details, without asking you to identify yourself.
Give out your name or phone number and you can expect agent calls before you’re ready. Give out your Social Security number and you can expect a check of your credit file. Multiple inquiries on your credit history can hurt your credit rating, and anytime you give out your Social Security number, you risk identity theft. So please be careful!
With this caution in mind, though, do look for quote sites that ask for detailed information on policy variables. For example, if you get a life insurance quote based only on age and sex and smoking status, you may not get an accurate quote, unless your health status is absolutely average. The more information you give, the more accurate the quote will be.
What kinds of insurance should I avoid?
Posted by Insurancedojo in Basics on May 13th, 2009
For every financial rule, there are exceptions, so don’t take these examples as gospel. Instead, think about it this way: Before buying anything on this list, be sure you know exactly what you’re doing, and go well beyond an insurance agent or salesman for advice:
- Mortgage life insurance
- Insurance on outstanding credit card balances
- Flight insurance
Generally, these kinds of policies prey on fear and are not competitively priced. In most cases, the same coverage is built into your basic life and disability policies. If you’ve set these up to cover what you can’t afford to lose, there’s no need to do it again.
What things should I insure?
Posted by Insurancedojo in Basics on May 13th, 2009
How’s your health? Could you afford to lose it? If you become sick or disabled, temporarily or permanently, would you be able to support yourself? For most people, the answer is “no,” yet a large number of people — even some with quality health insurance — are not insured for disability. This is foolish.
How about your life? If you were to die suddenly, what kind of financial hardship would result? Would there be dependents left without basic support? Would your burial costs impose undue hardship on others? Morbid as they are, these questions are at the root of life insurance decisions. If there are people who can’t afford to lose you, you should buy life insurance.
Sometimes, you buy insurance to protect lending institutions. If you have a home mortgage or a vehicle loan, you have little choice. The lending institution will force you to get insurance and will dictate the coverage levels. In this case, it’s not your financial hardship that lenders are nervous about; it’s their own. You have their money, and if you can’t pay them back, they’ll want the car. If you’ve crushed the car and have no insurance, well…
In the same way, private mortgage insurance (PMI) protects the lender, not you, should you default and stick them with a house worth less than the balance of your debt.
What if you own a car, home, or other personal possessions outright? Start by thinking about which of these are the most valuable. If these valuables were damaged or lost by accident or theft, would this lead to severe financial hardship? If so, you should purchase enough insurance to replace them. Most homeowner’s policies cover the loss of personal possessions. Renter’s insurance does this same trick for everybody else. Auto comprehensive and collision insurance covers the loss of your transportation.
The most complicated topic among these is liability insurance. You buy this to protect yourself from others. If your negligence or error should lead to damage of their property or, worse, their health, you should be prepared to cover these costs in case you are sued. Such liability coverage usually comes with your car and home or renter’s insurance. So-called “umbrella policies” are also available for more general liability. Coverage limits, in these cases, are usually based on your net worth and — here we go again — how much of it you can afford to lose.
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