Before you talk to an insurance agent it behooves you to do a little research about the insurance buying process. The purchase of insurance should be taken seriously and you should never rush in the decision process. Regardless of the insurance you are purchasing, whether it’s life or car insurance, it’s a huge decision that demands a little research and your undivided attention. Also, if you spent some time upfront and determine what you need or want, locating the insurance policy that best fits your needs will not be the unpleasant task that many people think it is.
That is why it is important that you meet with your insurance advisor to assist you in locating the best insurance policy for your needs. It is critical that the insurance you purchase meets YOUR needs and not the needs/wants of the insurance agent. You don’t want to make any hasty decisions, an incorrect could mean thousands of dollars wasted over the long term.
Insurance is important in the building and protection of your assets. Therefore, in the same way we spend time in developing an investment portfolio or business planning, we ought to dedicate time to determine our insurance needs. As we get older, our needs change and so our insurance needs. Furthermore, not all insurance companies are built equal.
I’ve compiled a list of six tips to take into consideration when purchasing a new insurance policy. Hopefully these tips will help you make a wise decision and save yourself countless headaches:
1. Determine your needs. This should be your first step in the purchase of insurance. Why are you buying insurance? What are you protecting? Determine how much it would cost to replace something that is valuable to you — your life, if you are disable and unable to work for three to six months, your home, your business equipment with which you generate revenues or anything else you determine is important. Compare the cost and inconvenience of replacing the asset you want to protect and you will find out that many times that insurance (when properly purchased) is comparatively inexpensive.
2. Research the company’s ratings. Many times overlooked. The best example was our recent recession. Many banks and insurance companies failed. Poor management decisions can lead an insurance company to lack the proper funding when the time comes to pay claims. Insurance companies are no different that other businesses. You need an insurance company that will be around when you need their service. Therefore, do your due diligence; you might even be surprised at the companies that don’t fare too well.
3. Check your insurance agent credentials. The presentation and sale of insurance products are regulated by your state. Insurance agents must be properly licensed and trained for the products they are presenting to you. As mentioned above, you need to have an insurance agent that is qualified to help you in the decision process and not just trying to sell you a product that they have no idea if it truly fits your needs but they know that they are making a huge commission on it. There are many insurance sales people, some are out there just for the commission they can make on the sale. However, there are a lot of great insurance professionals well trained and prepared to assist you in making the right decision.
4. Check your local BBB. Research consumer complaints filed against the insurance company under consideration. Knowing what the complaints are against a company will tell you how solid of an insurance company they are. Do not overreact on complaints filed, find out what type of complaints where filed and how the company handled them. Once again, insurance companies are no different than other businesses, they make mistakes too. Also, look at the frequency of complaints filed, are the same complaints being filed? Repetitive complaints could be a sign of weak internal controls.
5. Get the right coverage for YOU. Remember that the insurance must meet YOUR needs. Therefore, you should buy the right type of insurance and the right amount of coverage. Never let an agent tell you how much insurance or coverage you need. As a financial advisor, I could make a recommendation and it is my responsibility to justify my calculations based on the facts I have about my clients. However, it is YOUR responsibility to figure out how much insurance you want. Letting an insurance company blindly tell you what you need is like asking a casino how much you should gamble. Whether you need an umbrella policy or extended coverage, this is for you to decide, not an agent.
6. Ask some tough questions. Insurance is a significant financial decision. Take the time to really ask the tough and important questions. Also, remember that the investment in insurance coverage can have long-term implications. If your insurance agent seems uncomfortable, unable or unwilling to answer your questions, unprepared or unable to explain to you the insurance product that he/she is presenting to you, you are better off going to another insurance professional.
I hope these tips will be of help to you in the your decision making. As you may have noticed, I did not mentioned price on my tips. Even though, price is important, insurance is more than just price. Many times you will hear of horror stories of people that thought they had insurance or certain coverage and they find out the hard way and when it is too late. The cheapest insurance is not always the best option. Take these principles and print them out, keep them nearby when you are meeting or talking to your insurance agent. Remember, it is your money and it is your decision, if you ever feel that your agent is not listening to you or does not address your needs, that is a sign that it may be time to end the conversation and consider a different company. Take your time and make a decision you and your wallet can be proud of. Never buy insurance under pressure.
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