Category: Principles of Insurance

Insurance premiums for home and auto are skyrocketing across the nation. Additionally, in certain areas many companies are pulling out altogether, making a less competitive marketplace which drives even higher premiums.

Consumers, already staggering from high inflation, are left feeling frustrated and c0nfused. It w0uld seem that insurance companies are taking advantage in a struggling economy and that they are “just out to get rich off of people”. In reality, the situation is much more complex than people imagine.

Bottom line is that insurance companies need to make money like everyone else. Furthermore, rates are based on many factors. A recent article put out by Fox business discusses some of the issues involved. More important than understanding every single facet of why rates are jumping, is understanding what you should do about it.

The temptation is to automatically lower coverage to keep your rates the same. As a blanket measure to save money, this is a terrible idea and can cost the policy owner much more, should a claim occur. A much more intelligent solution is to evaluate level of risk one is willing to accept, and what protections are most important. Then, if premium is still an issue, start by raising your deductibles, look for common discounts, and as a last resort, lower limits.

Before making any changes to your policies, it is important to evaluate how much you can and are willing to put toward repairs/replacement of the insured item if a w0rst case scenario unfolds. Equally important is evaluating what you can do without. For example, say you have bad hail damage to your car. You may be able to live with that or you may not. However, the same hail damage to your roof can pose a much more urgent problem. When you evaluate what you want covered and how, you need to examine all the factors. A good agent will help you through this process.

After assessing the situation, a good rule of thumb is to start reducing premium by raising your deductibles. Keep in mind that whatever your deductible amount is, you should have access to in liquid assets. As you are seeking to save money keep in mind that many companies offer bundle discounts. Take full advantage of these as they can save you up to 15-20%.

If it is absolutely necessary to lower coverage start by eliminating some of the policy endorsements, like blanket increases in personal property coverages. Keep in mind that whatever insurance doesn’t cover will ultimately be your cost if/when something happens. As a last resort, you can reduce coverage, BUT be very cautious about doing so.

You can also look at other carriers. The risk with this is that not all carriers/agents are created equal. A habit of price shopping can leave you with a very poor customer service experience when you need the support most. It is worth extra money to work with good people.

In summary, the philosophy of insurance is that you pay someone else to help cover your back when disaster strikes, this is the principal of risk transfer. So, whenever you make changes, you are either increasing or decreasing your risk. As important as saving money on a monthly bill is, be wary of potential costs down the road that are much higher than your current premium.

When you have a claim you expect your insurance company to protect you. Most will for the first couple of times….BUT what if you have multiple cclaims in a year or over a few years

Many don’t realize the mindset of insurance companies at a corporate level. Insurance firms are for profit which means that bottom line they exist to make money. Now, ethically and legally they are bound to fulfill their obligations to the consumer when disaster strikes. However, there is little preventing the insurer from getting out of the contract if it becomes unprofitable. With due notice to the consumer they can cancel or non renew due to multiple claims in a short window especially if they can demonstrate that the claims were not all acts of God.

I’ve enccountered this situation several times. Most recently a gal who I will call Susan who has been with a certain major name brand insurer for a long time and experienced four major claims in the last few years. As a result she received notice from her insurance company explaining they were non renewing her. In helping Susan I was able to get her a replacement policy with a small brokerage firm, but for comparable coverage the cost was just over double that of her current premium.

My heart goes out to Susan since most if not all the claims were unavoidable in her case. I got to thinking how to avoid this situation. There are two courses of action that help reduce the likelihood you will be blindsided in the same way Susan was.

First get to know your agent well. Your agent is your liason with your insurance company. They are able to help walk you through the terms of your contract and be there for you before you start getting nasty communications from your company.

Secondly, bear in mind the profitability model that all businesses including insurance companies operate under. A coffee shop does not give away free coffee without a plan to grow business nor do insurerers pay claims without counting their costs which involves from time to time getting rid of or up charging “bad” risks.

With that in mind, it is important to consider carefully before making a claim, especially if you are several claims in. You might want to ask yourself can I afford this, what are the long term consequences etc. You might also consider switching to a company that has terms that are more favorable to you.

Above all talk to your agent they are there to help you. If you need an agent give my office a call (719) 247-0008 or fill out the contact form.

When you think of your insurance policies, what comes to mind? Are they simply another bill? Are they helpful tools? Or, are they essentiial building blocks for financial success.

Some view insuerance as just another bill.

I run into this a lot , Prospects like Charlie, who has state minimums on his cars, shops every year for the lowest rates, has no renters policy, and is content with his life policy through work which he had before the birth of his son.

The wiser among us, might view insurance as necessary or even as a helpful tool. Most of us fall in this camp making sure we get health insurance, life insurance, disability insurance as well as home and auto. Each of these products is great BUT h0w do they fit in the larger picture.

Most of us have a vague idea of financiall growth and wealth. We have this fuzzy idea of how our 401K plus social security plus savings is going to secure us a dream retirement. The reality is that building a strong financial picture requires a good deal of planning and strategy.

Not only do you need a plan and execution but it is helpful to see how diffeerent financial products, insurance among them, fit into the overal picture.

The great pyramids weree built from the bottom up, brick by brick with careful attention being paid to each block in a layer so that it could support the one above it. Wealthbuildding is like that,

The insurances you choose should fit into your overall goals and help protect you and your assets as you pursue and reach your goals. At every level there is a right amount/type of insurance that contributes and holds up the rest of the structure.

The best way to establish and realize your goals, is to visit with your insurance/financial professional. They will help you determine which and how much coverage you need to ensure your goals are met.

If you don’t have an agent helping you feel free to reach out to my office through the contact form and we will help you sift through how insurancee can be an integral part of your plan.

The most simple answer is…It depends.

Do you rent or own? How many vehicles do you have? What is your net worth?…

There are many iterations of questions like this. So many in fact that the list is nearly endless and it is nearly impossible for an individual without training to be aware of all the moving pieces. This is why it is extremely helpful to get and retain a quality agent. That way you have someone to look out for you and make sure your protection is up to date so you can live.

As an insurance professional, I’ve, found it helpful to boil down the individual questions to a summary one…

What could a catastrophe cost you?

If you are a poor college grad living with a roommate and broke, there frankly is not much to lose if you lost everything. On the other hand, if you have a good job, a family, a house or two, and a few toys, you’ll want much more thorough protection at higher limits because when Murphy’s law strikes you’ll want to be prepared since it is liable to cost you more.

The last thing to consider is,

what is the most likely disaster to strike?

A lot of this is dependent on where you live. Here in CO we worry about hail and wind as well as ice and snow. You’ll also want to consider things like are you in a flood-plain or are you in the middle of trees. Not only do these factors influence the type and amount of coverage you need they also play a part in the rates you pay.

One thing we often overlook is death. Every disaster has a percent likelihood attached to it. Death happens to be 100% chance. It is simply a matter of when and how. With this in mind, life insurance at every stage of life is the most important coverage to have. As with all other coverages you are best off consulting an insurance professional to get the right type and amount of life coverage.