Am I covered for that?

What product do you buy that is expensive but hope you never have to utilize? When I asked that question of a group once I got items like a generator, a fire extinguisher, and even a casket. Add to that list Insurance. It is a product that consumers constantly strive to find cheaper alternatives to reduce its impact on the family budget. Those alternatives usually come in the form of lower limits and with fewer coverages. Today many consumers go on-line or call an 800 number assuming a local agent’s costs will be higher. Sometimes those avenues can be cheaper but usually its smoke and mirrors. You must know that you are comparing apples to apples, or be prepared for shortfalls.

Do you really know what you’re covered for when you buy insurance? Farmers Insurance has a clever television commercial which plays on the lack of knowledge the average consumer has about what they are getting when purchasing an insurance policy. “…You think you’re covered for this, when you’re really covered for this…” The Farmer’s commercial satirically brings to attention to the fact that most consumers buy insurance policies with blind faith. Consumers make major coverage assumptions without realizing that virtually every insurance policy is different.  When buying through the internet or from an 800 number remember the adage ”you get what you pay for”. It’s a great feeling when you save money. But that elation turns to a hollow feeling in your gut after a loss as you try to figure out who to call, and then wait to learn if the loss is covered.

Insurance is best summarized as legalized gambling. I don’t know all the nuances of playing poker but I can assure you I would never think of gambling my family’s future without a knowledgeable and trusted guide directing me.  In the same way, few know enough about insurance to gamble on how best to protect all of their assets.

In the 1950’s, state’s began developing insurance regulations to respond to both abuses in the industry and to force the standardization of insurance policies. Out of those regulations came a standardized homeowner insurance policy. In the industry it became known as the Home Owner 1 (commonly known as an HO1) because it was the first standardized homeowner policy. All companies operating in a given state were required to use that as the basis of their homeowner policy. It basically covered fire, lightning and liabilities.  As companies wanted to stand ahead of their competition, they added coverages to it through “endorsements” or simply add-on coverage options. Eventually the industry standardized the common ad-ons in the next standardized homeowner’s policy known as the HO2 and eventually the HO3. The HO3 is the basis for the common homeowner policy sold by most companies today; but not all.  Many of those selling homeowner policies with the standard HO 3 commonly have special “endorsements”  that add or delete what you are covered for and to what limit.

Only a couple of the insurance companies I represent sell the standard HO3 without adding or deleting coverages through endorsements. In the case of two of them, it is cheaper for me to insure you with their HO3 plus a package of added coverage enhancements, than it is to sell you the standardized HO3.  Contrary to past history, most companies do not want the adverse publicity that comes from telling you, “Oh, you don’t have coverage for that”.

When shopping your insurance, are you capable of deciphering what differs between each quote? When you as a consumer seek to get competitive quotes, are you getting an ‘apples to apples’ comparison? Why do you need Sump pump coverage? Is refrigerated products included in my policy? Is there coverage for Identity Theft in the policy? One policy may be cheaper but those missing added coverages may not be wise to go without.

Today you have many methods by which to purchase insurance. Traditionally you sat across the desk from a licensed insurance agent. Ten years ago the big movement was to call an 800 number. Unlicensed operators and individuals who can’t speak the English language weakened that approach. Today’s push of buying coverage on line has its own issues. Who’s counseling you about coverages and limits you need? The terminology alone leaves most consumers questioning what they are doing. When you do reach a “human”, what are their qualifications? RI law requires any person explaining insurance coverages or limits to be licensed. But if they are not located in RI, the laws of their state apply. The businesses operating the internet and 800 number programs are commonly located in states that have less stringent insurance licensing regulations.

So why is dealing with a local insurance agent any different? Being licensed demonstrates knowledge. Being in the community means my reputation is at stake with every customer I serve. The big difference comes down to customer service. How many insurance companies will that internet company approach to secure your quote. What coaching do they give you about coverages, limits and the explanation for why you want or don’t want a coverage? When your home is gutted by fire in the middle of the night, where’s that internet company or 800 number. After a loss who’s going to help you get the loss paid in a timely fashion?

I believe my role as an independent insurance agent is safe against the internet and the 800 numbers. Consumer buying studies show that consumers are going on line for background information and getting quotes. The internet pricing is still very close to what an agent can offer. Those same studies show that more than 85% are demonstrating they still want the choices and comfort available from an insurance agent. As long as the insurance coverages vary and on-line companies lack resources to match the customer service levels provided by an insurance agent, my job is secure.