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How to Compare Insurance Plans: Home, Auto, Health, and More

Sue Allec - Jan 4, 2021 11:00:00 AM

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Selecting the right insurance for yourself, your family, or your employees can be incredibly daunting. Every day, you're flooded with commercials and ads promising the lowest rates and best customer service. But with so many insurers and different plans to choose from (all promising you the world) –– how do you know which one is right? It feels like you need a master's degree to make sure you're getting the right coverage for a fair price.

It's also easy to push insurance to the back of your mind when everything in life is going smoothly. You like to think you're a good driver, you take great care of your home, and you haven't had so much as a cold in years –– what could possibly go wrong? 

It's never fun to imagine the worst that could happen, but it's smart to be ready. Another driver could slam into your bumper on your way to work. Or a strong storm could send a limb into your living room uninvited. No one wants to be in these kinds of situations, but having the right home or renters insurance, auto insurance, individual health insurance, and life insurance can ease the financial and emotional toll of these frustrating experiences. 

From individuals and families to small businesses and large companies, everyone needs to weigh their options and make sure they have the right insurance. In this blog, we'll cover some frequently asked questions (FAQ) around topics like:

Let's dive in — shall we? 

An Overview of Homeowners, Renters, Auto, Life, and Health Insurance Coverage

First and foremost, you're going to want to understand what type of insurance policies you'll need. If this isn't the first place you've come to gather some info on insurance, you're likely aware that there are many different types of policies and coverages. So for your benefit (and sanity), we'll provide an overview of the more common 'must-haves' to get you started in the right direction. 

Homeowners Insurance

Homeowners insurance covers damage to the exterior and interior of your home. There are a variety of plan options meant to protect both your property and the possessions within your home. In the event of a fire, hurricane, vandals, or other covered events damage your home, your insurance carrier will compensate you to help you repair the damage or rebuild. The contents of your home may also be replaced if they have been damaged by a covered event. 

If you are a renter, it will extend coverage to the contents of your home. In both cases, having your personal property covered in the instance of theft or major unexpected damages is critical. 

Renters Insurance

Even if you don’t own your home, you may still need to have a type of home insurance called renters insurance. Whether or not your landlord requires it, it's a good idea to have a policy in place. 

Renters insurance offers various types of coverage. One is personal property coverage. This coverage will repair or replace your personal belongings against certain events. Liability coverage is also part of your renters insurance policy. This will protect you if someone is injured in your apartment due to your negligence.

Auto Insurance

Not only should you not drive around uninsured due to the financial risk, but it is against the law to drive without liability coverage. You are required by law to have liability auto insurance coverage that will cover the costs of any property damage, medical expenses, or injuries that you might cause in an accident. 

Did you know that over 4.4 million people were injured seriously enough in car accidents in 2019 that they needed medical treatment and that as many as 38,800 people died in car accidents last year

While these worst-case scenarios are one reason to have automobile insurance, many states require drivers to have car liability insurance that will at least cover the financial liability of their actions in a car accident. Most people also choose to have collision coverage that will cover the cost of replacing or repairing your vehicle after an accident. You may also opt for comprehensive coverage that will cover losses that are not caused by a wreck, such as theft, vandalism, fire, flood, or hail.

Life Insurance

This is always a sensitive topic and can seem morbid, but life insurance policies should not be overlooked. They are essential to making sure your family is taken care of should you die unexpectedly. 

There are two types of life insurance policies: term and whole. Your insurer can help you understand your eligibility, the difference between the two and advise you if one or the other plan types, or a combination of the two, is the right plan for you.

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Health Insurance

The health insurance marketplace is complex and confusing. However, it is essential to have it, regardless of your age and health, but particularly if you are older or have health issues. It keeps health care costs low and helps with health care services like routine medical care and prescription drugs. 

Health insurance is a unique situation since it's often provided through an employer in America, and there are specific open enrollment periods when you can sign up or make changes. They may also offer alternative benefits like a health savings account or HSA. 

If you are self-employed or your employer doesn’t offer a health plan, you will need to sort through plans available on the HealthCare.gov exchange, such as the Affordable Care Act or ACA, or find a private health insurance plan to provide your coverage. If you are 65 or older, you can qualify for Medicare. Medicaid is also available to low-income families.

When choosing health care coverage, there are a few main types of insurance plans available, including the following: 

  • Preferred Provider Organization (PPO) – This type of health plan contracts with doctors and hospitals to provide a network of healthcare providers. They also offer coverage for treatment outside of the network, but you will often be required to pay a lot more for these services. While these plans are often more expensive than other types of plans, they offer a variety of providers to choose from that are near you. 
  • Health Maintenance Organization (HMO) – This type of plan only covers treatment provided by doctors and facilities that your plan is contracted with. HMO’s are typically restricted to a specific area, which means you will need to work or live in that area. There isn’t much flexibility in choosing a provider, but lower premiums and fewer out-of-pocket expenses make them attractive to those on a tighter budget.
  • High Deductible Health Plan (HDHP) – Just like the name implies, these plans have high deductibles. The benefit is that they offer lower monthly premiums. The IRS defines what a high deductible is, and the current definition for 2020 is a plan with a deductible of $2,800 or more for a family and $1,400 or more for a single person.
  • Exclusive Provider Organization (EPO) – This health insurance plan only allows you to get health care services from doctors, hospitals, and care providers who are in your network.

Defining Some Common Insurance Terms

There are some common insurance terms that get used pretty often, but they can be complicated to grasp. To help you understand what you need and what you don't, we've defined a few of the standard terms you'll hear when discussing insurance.  

Deductible 

A deductible is simply the money that you have to pay out of pocket whenever you file an insurance claim. Let's say you run over a piece of debris in your car that causes $3,000 in damage. Luckily, you have a $250 deductible with your auto insurance so you're only on the hook for $250 instead of $3,000 since your insurance plan covers the rest after you reach your deductible. 

Monthly Premium 

A monthly premium is just a fancy way of referring to your monthly payment. It's the rate that you pay for the coverage you receive. Many factors go into how your monthly premium is calculated, some that you can control and some that you can't. 

Primarily, the two factors you can control are your history (car accidents, claims, health and lifestyle habits, etc.) and your deductible. Think of your monthly premium and your deductible as two sides of a scale. If you choose to decrease the amount of your deductible, your monthly premium likely increases, and vice versa. 

We actually wrote a whole blog on balancing coverage and cost properly that you might want to check out. 

Coinsurance 

Coinsurance is a common term in health care. This refers to the percentage of costs of a covered health care service that you have to pay after you've paid your deductible. For example, if you have an appointment with your primary care physician that costs $100 and your coinsurance rate is 20%, you would only pay $20. Just remember that this is only after you've met your deductible. So if you hadn't, you would have to pay the full $100. This is not to be confused with copayments –– or copays for short –– which is the amount you pay for services that are covered by network providers. 

Tax Credits

Tax credits are another potential way to lower your monthly insurance premiums. Credits are based on your income estimate. You may have also heard of a subsidy. These help you pay for health insurance by lowering your monthly premium and your copays.

Gathering Insurance Quotes

Not all insurance policies are created the same. Each company evaluates risk differently across the major categories. This means they will also offer you different coverage options, deductibles, and pricing options based on your personal circumstances.

Having the right insurance policy that protects you from unforeseen events will give you peace of mind. Sure, it seems like a pain to pay your premium each month where nothing out of the ordinary happens. It's like carrying an umbrella with you everywhere when the sun seems to always be shining. But the one day you don't take it with you, you'll get caught in a torrential downpour. 

Prices to Expect

Start by understanding how much those insurance coverage policies should cost. Here's a simple breakdown of the costs of the main categories:

INSURANCE TYPE COST
Homeowners/Renters Insurance The average homeowner’s policy costs $1,445 per year ($120/month), and the average renters insurance policy costs $15 per month.
Auto Insurance The average cost of car insurance is $1,427 per year or about $119 per month.
Life Insurance The average cost for a term life insurance policy is approximately $18 per month for a 20-year, $500,000 policy. That same policy as whole life insurance would cost, on average, $283 per month
Health Coverage The average cost for a health insurance plan is $456 per month for an individual or $1,152 for a family per month.

Shop carefully and don't just take the insurance company at their word. Just like you research and read reviews before you buy a new blender, you should do the same for insurance. Companies like A.M. Best rate insurance companies so you can do your homework and get an unbiased opinion on their policies. 

The “right” company for you is the one that will give you recommendations, products,prices, and referrals appropriate for your situation, take care of their financial obligations to you, and has a record of outstanding customer service. For more on how to make sure you're not overpaying, check out our blog on the right way to get the right insurance.

Learning How to Shop 

Nearly all health insurance plans include a network of hospitals and doctors, but the size of that network may vary, even among the same types of plans. In almost all cases, you will also save money by using a hospital and doctor inside the network because the health insurance company has contracted with those providers for lower rates for their services. 

Some plans will provide coverage for services obtained outside of the network, and others won’t, so it is essential to know which hospitals and doctors are in your network before purchasing a plan. This also applies to auto insurance. If your vehicle is damaged in an accident, your insurance company may specify which auto body shop will make the repairs. In addition, here are a few tips to consider when getting quotes for insurance:

  • Review your current plan, if you have one, and determine what your coverage and premiums are so you will know what comparisons to make when shopping for new coverage.
  • Make yourself familiar with the types of plans so you know how your choices will impact your costs and overall satisfaction with your insurance coverage.
  • Get treatment and claims cost data from your insurance company to understand any past, as well as any potential future, medical costs. Use this to estimate out-of-pocket costs for any other plans that you may be considering.
  • Research the networks for any plans that you are considering to see if your local hospitals and preferred medical providers are included in the network.

Experts Can Save You Money 

When it comes to choosing an insurance plan, everyone wants the same things: 

  1. A plan that offers a monthly premium within your budget
  2. The best coverage for your money
  3. The least out-of-pocket expenses

Of course, that's easier said than done. When you have a hundred other things to worry about on a daily basis, you don't have time to become an insurance expert. So you either don't have the coverage you need, or you wind up paying way more than you should. 

So it really is best to reach out to a good insurance agency. They will be happy to help you explore your options, understand the choices you make, and help you find the right plan for you. For example, if you contact our team, we don't try to sell you anything at all. We're independent advisors, so we don't work for any insurance company — we work for you. Contact us today, and an advisor can help you find the coverage you need at a price you can afford. We’ll take the guesswork out of finding the perfect plan for you.

Questions for an advisor?

Topics: Personal Insurance- Personal Insurance- Featured

Sue Allec

Sue Allec

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