Friday, July 2, 2010

Insurance: Is a low rate always the best value?

When I opened our new escrow statement this week, I immediately looked at the total payment amount. I breathed a small sigh of relief when I saw that it was roughly the same as it had been before. Still, a closer look revealed that our hazard insurance premium was increasing. I whipped out my calculator and found that the increase amounted to an extra 15 percent.

I know it’s wise to get a new rate quote from competing insurance companies every year, but our insurance has become an expense we don’t tend to think about. We budget for it and record the automatic withdrawal in our checkbook register every month. Nevertheless, seeing an unexpected increase was enough to jolt me out of my complacency and remind me that we can’t assume we’re getting the best rate possible.

I dug out our policy statement and called our insurance agent the next day. He explained that the increase was caused by what he called “projections of future losses.” In other words, our home insurance premium was increasing so that our company could pay us (and other policy holders) in the event of widespread losses. He admitted we might be able to find a less expensive premium elsewhere, but he said we should consider the overall health of the company before we decided to make a switch.

After talking to my agent, I knew I needed to see how our rate compared to those of other companies. I called several insurance companies. Even though I was dreading the work of making phone calls and giving my personal and policy information over the phone, I found friendly, knowledgeable agents who were willing to help me. By the end of the day, I had several new quotes to consider.

All the quotes I received were lower than the hazard insurance premium we’re paying with our current company. Sometimes, the difference was negligible, but a couple of quotes came in significantly lower than ours. One company can beat our current rate by a whopping 30 percent. If we chose to switch companies, we would save close to $400 a year.

I can think of a lot of ways I’d like to spend $400, but my home insurance premiums aren’t on that list. Still, there’s more to consider than the rate alone. Part of the value of using our current company is that we’ve created a relationship with our agent. When I called him, he immediately knew who I was, and he took the time to explain the rate increase in terms I could understand. The insurance company we use is financially healthy and growing. That’s worth something to me.

Now I have to decide how much it’s worth. I plan to go back to my agent to see if he can give us a better deal on our hazard insurance. If he can’t, then we need to decide if we’ll knowingly pay more for our insurance or if we’ll do the legwork to change companies.

Either way, I’m glad I took the time to compare hazard insurance rates. (Now it’s on to automobile rates, too.) My husband and I are more informed consumers, and we can use this information to make smarter choices about how we spend our money.

Are you confident that you’re getting the best value with your insurance? If not, take time to get quotes from several companies. The work you invest could result in renewed faith in your insurance company, or perhaps, a switch to get better premiums so you can stretch your money farther.

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