Buying insurance can be tedious and overwhelming. From ensuring you are getting a good deal to selecting the right company that matches your needs. Furthermore, it is important to consider each company’s reputation, financial strength, and ability to pay out claims.
Here are seven considerations when choosing the right insurance company that best fits your needs.
1. Where and how can you buy it?
Let’s start by differentiating the roles of an agent and an insurance company.
An insurance company provides the insurance policy which is a contract listing coverages, policy options, premiums and who is covered. The insurance company mails the insurance policy to the customer, bills them and pays out the claims in case of a loss.
An agent assesses the individual needs and requirements of the customer and supports the customer with finding the right coverage. Agents can help you understand what the policies, coverages and exceptions are. However, they cannot write the insurance policy for the customer, as that is done by the insurance company itself. Agents are divided into two types: independent and captive.
- An independent agent can work with several insurance companies at the same time and can be a great source for comparing multiple companies. There are many insurance companies that will only offer their policies through independent agents.
- Captive agents are employees or contractors that can only offer the policies of a specific company. State Farm and Farmers are examples of such companies. Even if you get an online quote, you must talk to an agent to purchase the policy.
Another option is to purchase the policy directly from an insurance company. Online channels are a good example of this. The two main options are online first companies such as Lemonade or Esurance, and companies that offer online quotes and transactions in addition to agents such as Geico or Progressive.
Though purchasing insurance online can be significantly more convenient, some may prefer to discuss their needs with an agent to receive advice or guidance through the process.
2. Reputation and reviews
When things go wrong, it is important to know you are in good hands. A company’s history of complaints, as well as customer satisfaction after a claim is made, can be extremely helpful when choosing the right company. There is a great amount of information that can be gathered by visiting insurance company websites and websites that collect customer reviews.
3. Financial strength of the insurance company
If choosing a big brand insurance company for personal auto, home, or life insurance, there generally is no need for worry. However, it might not hurt to double check a company’s Financial Strength Ratings, provided by various rating agencies including AM Best, S&P and Moody’s. All rating agencies have their own criteria for evaluating the financial health of an insurance company and may include the company’s historical performance, assets, liabilities, payouts and net income.
A positive rating from AM Best, S&P and/or Moody’s, would indicate that the insurance company is in good financial health and has the ability to pay out claims to its customers.
4. What is covered, how good is the coverage, and how flexible are the options?
Even though many things are standard for typical non-business insurance policies, a policy is still a contract and should be treated as such. Details and coverage should be understood clearly. Thankfully, reading the reviews of an insurance company or working with a good agent can help lower the risk of getting a policy with language that is unfair.
Furthermore, companies vary on their coverage limits and deductibles. Some companies allow very high deductible plans to lower premium payments, while others may limit the options.
5. Cheaper is not always better
This can get tricky! We all want to pay less, but want to get the most for our coverage. The reason why it might be tricky in the insurance market is that lesser premiums may mean various things:
- It may mean paying higher amounts out of the pockets in case of loss (deductibles).
- It may mean less coverage.
- It may mean a higher chance of claim denial.
- It may mean worse experience with comes to handling your claim.
As a result, we suggest assessing your needs and expectations followed by a comparison of insurance quotes from different companies. Unfortunately, to lower the cost, many price comparison websites offer the absolute minimum in coverage which can be misleading. It is important to know what you are paying for.
