Insurance for Dummies, 2nd Edition
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You buy insurance to protect your income, your family, and your assets from financial ruin. But just any old insurance won’t do. You owe it to yourself and your loved ones to obtain and maintain the correct type and amount of coverage from a financially secure insurance company.

Insurance is worth nothing if the company isn’t around to pay claims when you’re in need. And you definitely don’t want to waste money paying for insurance that won’t pay off if the need arises because the insurer argues that your loss isn’t covered.

Become an informed consumer by doing your own research. Check out the quality companies and the types of insurance you feel you need before you contact an agent. Here is a checklist of the major issues to consider when evaluating your current insurance coverage or considering purchasing new policies.

  • What is the financial strength of the insurance company?

    • Check out A.M. Best ratings on any home, auto, life, or health insurance company, and only do business with the financially strongest companies. The financially strongest companies can also be competitively priced. You don’t have to give up security to save money.

    • You can also see how Standard and Poor's rates these same companies.

  • What are the claims payment history and customer service ratings?

    • Visit your state insurance regulator’s Web site or call the regulator’s office and inquire about the insurance company’s complaint history.

    • Check out the rankings on overall customer satisfaction, claims payment history, pricing, and communications with J.D. Power and Associates.

    • Another great resource to check out a company’s customer service history is Consumer Reports. Click Money and then Insurance. Consumer Reports online is available for a modest annual subscription price.

  • Compare Prices: You can find many online resources that enable you to obtain quotes and additional information so that you can do some comparison shopping.

After you’ve had the opportunity to check out the financial strength of an insurance company, whether its customers are happy, and whether its price is competitive, you’ve greatly narrowed your selection. The only things remaining are the specific “bells and whistles” of the insurance coverage you currently own or are considering.

When you comparison shop, get quotes on comparable policies from three different sources. The three primary ways to obtain insurance quotes and products are through the following:

  • A captive agent represents only one company. Captive agents can be extremely competitive and provide exceptional customer service, especially for home and auto coverage. However, you won’t likely want to acquire all your insurance through one captive agent. These types of companies often aren’t the most competitive in the areas of life, health, disability, and long-term care insurance.

  • An independent agent represents multiple insurers. Independent agents can do a lot of comparison shopping for you and may be able to provide you with one-stop shopping for all of your insurance needs; however, don’t count on it. Shop around — even among independent agents there can be a huge difference in their offerings.

  • Buying directly from the insurance company is another option. Don’t count on any personalized attention, but you may save some money. However, buying certain types of insurance, such as long-term care, disability, or medical insurance, without the guidance of an insurance professional may not be in your best interest.

Many insurance agents and companies out there are very interested in parting you from your money. In almost every case, insurance agents are paid only when they sell you a policy, and the more they sell you, the more money they make. Too often, insurance agents don’t put your best interest first. Above all, remember that insurance agents are sales people. Buyer beware!

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