Shopping for insurance can be intimidating. There are so many different insurance types available for an individual or family that it’s hard to know what kind you need to be protected. Not to mention the number of insurers out there, all promising to provide the best coverage and price.
You might be skeptical that the insurance agent's suggestion is not always in your best interest. And after you've seen hundreds of commercials and advertisements for endless insurance companies, no one can blame you.
Unfortunately, this skepticism causes many people to grab the cheapest policy and move on with their lives. And those same people are dangerously unaware of how much serious financial risk they're putting themselves in by not having the right insurance for their situation. Or on the other hand, you might be fearful of not being covered. So you technically have great coverage, but you're paying way too much for it.
So, how do you find the right insurance policies and the right company to cover what you need at the right price?
Slow Down and Explore Your Options
Before you even start shopping for insurance, sit down, and think about some of the things you want to be covered by an insurance company. What things might put you at risk, and what types of insurance could help mitigate those risks? Here are some of the most common types of insurance coverage that individuals and families should have at the very least.
- Homeowners/Renters Insurance – This type of insurance coverage protects both your property and the possessions within your home. 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.
- 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. 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 provides financial benefits to your family if you were to die unexpectedly. There are two types of life insurance policies: term and whole. Your insurance agent can help you understand 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.
- Health Insurance – This will cover your routine health needs, as well as emergency coverage. Without health benefits and prescription drug coverage, you could be at risk for medical bankruptcy.
Now that you know the common insurance plans you'll likely want to have, you should know how to spot the signs that there's a better policy out there for you.
A Sign That You're Paying Too Much
A raging kitchen fire. A bad car wreck. A major illness or surgery. If you’re not protected with the right insurance coverage, just one uninsured incident like this can result in catastrophic financial loss due to out of pocket costs.
So yes, having the right insurance that covers you in one of these situations is crucial. And it would help if you considered the cost of insurance the same as you do for electricity, gas, food, etc. You plan for those monthly expenses, and an insurance monthly premium should be one of those given costs. However, it doesn't mean you should overpay for that coverage.
Not overpaying for personalized insurance products starts with understanding how much those insurance coverage policies should cost. Let’s break down the average costs of each of the insurance types listed above.
|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.|
So how much will your insurance cost? That depends a lot on you and your situation. As you get older or your situation changes, so will your insurance needs and your insurance costs. Many factors play a role in how an insurance premium is calculated. These depend on the type of insurance but may include things like your age, health, claims history, size of your home, deductible, coverage limits, and more.
Regardless of your age or what types of insurance you initially purchase, it is always a good idea to assess your insurance coverage every year to two, or whenever you go through a major life event, to determine if your coverage needs to be adjusted.
A Sign That Your Deductible Is Too High
We hear the word deductible a lot when discussing insurance. This is the money that you pay out of pocket toward a claim that is covered by your insurance. For example, you have insurance coverage on your home with a $500 deductible. If a fire causes $10,000 worth of damage to your home, you pay $500 toward the cost of the repairs, and the insurance company will pay the remaining $9,500. This is sometimes referred to as coinsurance, particularly for medical care and your health insurance company.
In some situations, like health insurance, once you meet your deductible or pay the full amount of the deductible, your insurance will cover all remaining costs for claims covered up to the limitation of your policy. In some situations, you may have multiple deductibles for the same policy, such as an individual deductible for each member in your family, as well as a family deductible. Even after you have reached your deductible, you may still be responsible for paying a copayment for health care services unless you have a secondary insurance company like Medicare, Medicaid, Medicare Advantage, or other medical services insurance coverage provider.
Some insurance policies allow you to choose your deductible amount. If you have that choice, there are a few things to consider. You may be able to save yourself some money by choosing a higher deductible because this often results in lower premiums. However, you should be financially prepared if you have to pay that higher deductible. And we suggest you make that decision with the assumption you will have to pay it at some point. That way, you can manage it financially if or when the time comes.
It may be better for you to pay higher premiums but have a lower deductible in some situations. Insurance agents who are licensed and qualified to advise on a certain kind of insurance should be able to help you determine what deductible would be best for you. They will also advise you if you can claim your premiums as tax credits and if the coverage meets the Affordable Care Act requirements.
You Find Yourself Hassling With an Insurance Company
Once you have determined what type of insurance you need, gotten an estimate of the cost, and checked on the deductibles, it's time to find the right insurance company. Consider what plans each prospective company you have talked to can offer and compare how their plans differ.
If you are purchasing home insurance, make sure you weigh the pros and cons of your policy’s deductible, the amount you’ll have to pay out-of-pocket before your insurer begins paying your claim. Higher deductible policies are appealing because they’re less expensive but can be a huge financial burden if you have to file a claim.
For health insurance, ask if they are an HMO or PPO. Do they cover medical care, mental health care, and preventative care? Do they have a preferred provider organization? Will you be able to choose who provides your primary care? Do they cover healthcare for COVID-19 (coronavirus)? Don’t hesitate to ask for estimates because they should be free if you're working with a reputable insurance agency.
Certain things can help you save money (or increase your premiums in some situations), so be sure to share that information with your potential agent. These things include completing a defensive driving course, good grades in school for teenage drivers, your health condition, or pre-existing conditions for health insurance. You will also want to find out if your doctor and local hospital visits would be covered under the plan.
Next, you will want to find out if the company is licensed, if they have a good reputation, if their financially healthy, and whether or not they provide good customer service.
What’s the Right Way to Get the Right Insurance?
It’s easy to believe that insurance policies are relatively the same across all companies. However, the truth is that each company evaluates risk differently. This means they will also offer you different coverage options, deductibles, and pricing options based on your personal circumstances.
So, shop carefully and never let an insurance agent make you feel pressured. Take the time to talk to them and ask questions, and do some research online. Don’t take the first plan you see. The “right” company for you is the one that will give you recommendations, products, and prices appropriate for your situation, can take care of their financial obligations to you, and has a record of outstanding customer service. Be sure to check independent company websites like A.M. Best. These companies rate major insurance companies and help you make a more informed decision by comparing various policy options.
At Conover, we understand that process can be overwhelming. Know that as independent insurance brokers, we are here to help you find the best insurance for your situation. We don't work for an insurance company; we work for you. Our advisors welcome any questions you have about insurance. Plus, if you're already shopping around, you can get a free quote to compare policies further.