Should you buy insurance from someone you trust or someone who gets you the lowest price?
The right answer is someone you trust, because there are lots of bad ways to get a low price, and you might not even be aware of them. Here are some recent news items to illustrate the point:
“House Fire Causes $750k Damage”
Assuming this homeowner has adequate limits, his claim result will depend on the quality of his contract. A bad way to get a low price would have been to choose depreciated value for documented contents and a standard builder material rebuild. The best insurance will replace exactly what he lost, or quickly give him a check big enough to start over elsewhere.
“Bruce Jenner Sued In Fatal Car Crash”
Jenner wasn’t charged at the site of his recent accident but the victim’s relatives sued anyway claiming “enormous damages”. It was rumored that his auto limits were low. If true, that turned out to be a bad way to get a low price.
“Jury Awards $40mm to Family of Victim in Diner Stabbing”
Restaurants need an “Assault and Battery” rider for this to be covered. If this restaurant chose a bad way to get a low price and didn’t get the rider, this type of claim is completely excluded.
Here are some other bad ways people get a low price:
Personal Lines
- Low liability limits
- Low liability base limits with umbrella resulting in coverage gap
- Depreciated or “blue book” value instead of replacement value
- Fine print limited replacement value
- Unrealistically low home replacement value
- Water/sewer/pool exclusions
- Low internal limits on jewelry/art
- Low limits or no coverage for uninsured motorists
- Failing to list young drivers
- Understating mileage drive or use of vehicle
- Applying for unentitled discounts
- Insurer has lousy service/claims processing
- Insurer drops you after one claim
Commercial Lines
- No assault and battery coverage for restaurants
- Other exclusions like employee dishonesty or fire legal liability (when your fire burns neighboring buildings)
- Missing coverages like business interruption and employment practices
- Failing to list drivers with bad records
- Misclassifying worker type or payroll to minimize Worker Comp premium resulting in audits and fines
- Legal defense “inside limits” which means if sued legal fees can eat through your insurance leaving little or none for settlement
Bottom line: when someone tells you about the “great deal” they get on insurance, remember there are lots of bad ways to get a low price. Stick with someone you trust.
This site is informational and not a substitute for professional advice. Insurance coverage is subject to the language of the policies as issued.