Do I Have a Deal for You

Do I Have a Deal for You

In Hollywood, everyone from the parking attendant to the prima donna has an agent. But buying insurance isn’t like inking a pact with a movie mogul. You might do better without an agent.

The Buyer’s Guide to Insurance from Consumer Federation of America’s Insurance Group offers some guidance.

The best way to use an agent: Agents almost always sell insurance on a commission basis. The more money you pay them, the more money they make. Agents representing only one company usually receive a lower commission, so that their prices can be lower than “independent agents who sell for several companies”. Companies that don’t use agents usually have the lowest rates. Furthermore, consumer satisfaction tends to be higher for the lowest priced companies.

The best way to use an agent is to get a good low price from a company that doesn’t use agents then ask the agent if he or she can beat that deal. According to CFA, USAA (which only sells insurance to active or retired armed forces commissioned officers) and Ameritas are “the best companies” that don’t use agents.

A good deal. Photo by Elena

When more means less: Premiums tend to be proportional to policy limits; a $360,000 homeowner’s policy costs about 20 percent more than a $300,000 policy, even though the extra risk for insurance companies (because most claims are for partial losses) is far less than 20 percent more.

So don’t automatically go along with agent or company suggestions or higher limits. Beware of inflation-guard automatic increases in coverage or premiums. The percentage insurers select may be too high (or, sometimes, too low) for your house. Check it out against recent sales in your neighbourhood.

Why not to drop an old policy: Don’t let an agent talk you into dropping an old life insurance policy, if it pays dividends. Replacement of such policies has reached scandalous proportions in recent years as agents churn such policies for commissions.