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Just Because It's Cheap and Quick, Doesn't Mean You Should Buy It
Fast Food Insurance
Many insurance companies are successfully selling consumers on the idea that cheap is good when it comes to insurance.  Ask yourself, "When was the last time cheap was a good thing for any product that I have purchased?"  If you are like me then you have learned that cheap is very expensive.  It doesn't matter if we are talking about cars, shoes or insurance.  If you are getting an unusually low price, chances are there is a reason for it.  Either you have purchased an inferior product or there is a catch that you don't know about.  With shoes and cars, you may be able make an educated guess that the manufacturere used cheaper materials or they had the product made in a country where the workers are under paid.  But, with insruance, the devil is in the details.  That fine print they call a policy.  Technically, they aren't hiding anything from you because all the information is right there in front of you.  The problem is that you probably don't know what you are looking at.  Even if you do understand the language in the policy and the declareations, you probably don' know how that compares the other products in the market.  The truth is, most people who buy a policy on-line or from an 800 number really don't know what they are buying.  All they know is that they want it to be cheap.  And it is.

Did you know that the over all pay out for the same loss for a home fire from two different insurance companies can vary by hundreds of thousands of dollars?  The policies could be written for the same house with the same home value and still the pay out could be hundreds of thousands of dollars different.  Here is an example:

Coverage                   Insurance Policy 1                     Insurance Policy 2

Dwelling Coverage

$400,000

$400,000

Other Structures

$40,000

$40,000

Personal Property

$280,000

$200,000

Loss Of Use

$400,000

“Actual Loss Sustained” (12 month limit)

Personal Liability

$500,000

$300,000

Law and Ordinance

$40,000

No Coverage

Sewer & Water Backup

Full Limits of Policy

$25,000

Earthquake

Included

No Coverage

Deductible

$1,000

$1000 /1% for wind and hail

Premium:

$925

$690

 

 

 


Which policy would you rather have following a loss?  If your house burns down, Insurance Company 1 will pay more for your personal property and for your Loss of Use.  If you have Company 2, what happens after you have been out of your home for 12 months and your home is not rebuild yet?  What if your home needs to upgraded to the new local laws and ordinances under policy 2?  I hope you saved that $235 you pocketed by going with the cheaper policy because you are going to need it.
I sure hope we don't have an earthquake if you purchased from Insurance Company 2.  Because if we do, you may find that your home needs major repairs and you won't have any coverage.  What if your sump pump fails and your basement floods destroying all of your furniture, drywall, carpeting and your new flat screen TV?  Not to mention the cost of water removal and the potential for mold remediation.  Company 2 will only pay $25,000.  Company 1 covers you up to the policy limits which are $400,000 for the dwelling and $280,000 for your personal property and $400,000 for Loss of Use.  That is $1,080,000 of coverage with company 1 versus $25,000 with Company 2.  Which would you rather have?

When it comes to insurance, cheap is expensive.  You always get what you pay for.  The truth is, we all really know that.  We just want to save money which is understandable.  The best way to save money is by understanding your options and selecting the coverage that is most important to you.  But, most consumers do not have an insurance license or any formal training in insurance contract language.  That's why you should be talking to an agent.  Someone who has dedicated their career to understanding the differences between policies and who can help you understand your options.  If you buy a policy on the internet, you are taking the roll of the agent.  You become completely responsible for what you purchase whether you understand it or not.

Whether you eat fast food or not is an issue between you and your doctor.  But, if you decide to buy a cheap insurance policy without talking to an agent then you are truly on your own.  All the cute characters from the TV commercials won't help you if you have the wrong coverage regardless of how much you saved.  Insurance is a key part of your financial security; don't you think you should spend more than 15 minutes so that you know what you are buying?
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