10 Things to Know When Buying Insurance Policies

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If you have ever had to make an insurance claim, you know that your premium dollars pay for very important protection. Hopefully, you enjoyed a hassle free claims process. If you did have problems getting your claim paid, you probably considered finding another insurer. Either way, you learned the importance of having an insurance company on your side!

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10 Insurance Buying Tips

Consider these insurance buying tips before making any decisions. These tips are general enough that they could be applied to almost any type of insurance you can think of — i.e., home insurance, life insurance, auto insurance, etc.

1. Be wary of sacrificing coverage to save money

Sometimes it makes sense to raise your yearly deductible or forgo an option because the premiums are too high, but make sure you understand what you are signing up for.

2. Look at an insurance company’s financial ratings

The internet makes it very easy to research an insurer’s financial ratings to make sure your company will be around when you need them!

For example, Insure.com provides a very good insurance company ratings lookup tool.

3. Find out if other covered people have complaints

Every U.S. state has an insurance department, and they will have complaint records. You can probably even find them online at your state insurance department website.

For example, here is the New York State Insurance Department web site.

4. Insurers use different underwriting guidelines

A decline by one company does not mean that your application will be declined by all companies. Agents should have a good idea about who will get accepted before they submit an application, but they cannot always predict underwriter actions. Comparison shop for insurance just like any other major purchase.

5. Make sure that your agent is duly licensed

This may sound obvious, but many stories have circulated about unlicensed agents selling fake policies. They collect an upfront coverage and disappear, and then the consumer has no coverage without even knowing it.

6. Make sure the company is licensed to do business in your state

Again, make sure you do not get fooled. This is very rare, but even licensed agents have been fooled into selling products from “fake” insurance companies. It is so simple to check on a company with your state insurance department that it should never happen, but it has happened.

7. Clear up any concerns before you need to use your policy

For instance, if you travel a lot, find out how your health insurance covers overseas medical services. If you absolutely have to have transportation every day, will your car insurance policy provide a rental car?

8. Find out how your insurer will service your claims

Do you have toll free number to call if you have a car accident out of town, and can you check your claims status online? You certainly want to know how claims get handled before you need to file one, and a more convenient and consumer oriented company may be worth a few dollars more a month.

9. You have a 30 day “free look”

Your policy should come with a 30 day free look. You should be able to cancel during that time with a full refund. Of course, you can also cancel most policies at any time without having to pay more premiums.

10. Shop around before you buy insurance

You will find that different insurers in your area will offer different rating scales, discounts, and premiums. Be sure and compare 3 to 5 different policies before you commit to an important, long term contract like insurance.

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Penelope Pince
Penelope Pince
15 years ago

Thanks for these tips. I’m about to start shopping around for health insurance and will keep all this in mind.

Chris Cashman
Chris Cashman
15 years ago

I would be a bit wary about the financial strength ratings at the insure.com site as they list most of the AIG companies as A and A+. This is probably due to the fact that the ratings there have not been updated since early September.

15 years ago

Thanks for sharing these tips. I like the idea of going to a local agent, and meeting him/her in person to see what’s available — and then comparing to what I can get online.

Grant Baldwin
15 years ago

Not only some great tips, but great links and resources to put action to it.


Robert Bland
15 years ago

Hi, I just triple-checked the AIG life company ratings at Insure.com and found that they are perfectly accurate as of today: UNITED STATES LIFE NY, NAIC# 70106 A.M. Best A (11/10/2008, Affirmed, Outlook: Negative) Fitch Ratings AA- (9/17/2008, Revision Implication Watch, Outlook: Rating Watch Evolving) Moody’s A1 (3/2/2009, Downgrade, Watch Status: Not on watch) Standard & Poor’s A+ (9/15/2008, Downgraded, Outlook: Watch Developing) TheStreet.com Ratings C (8/14/2008, Downgraded) AMERICAN GENERAL LIFE TX, NAIC# 60488 A.M. Best A (11/10/2008, Affirmed, Outlook: Negative) Fitch Ratings AA- (9/17/2008, Revision Implication Watch, Outlook: Rating Watch Evolving) Moody’s A1 (3/2/2009, Downgrade, Watch Status: Not on… Read more »

14 years ago

Great tips, the internet has made it easy to find information from reliable sources these days. I agree with the second tip and the last tip. It’s vital to know the financial strength of the insurance company you will be investing in. Some of the most recognized life insurance rating organizations are A.M Best, Standard & Poor’s, Moody’s, Weiss and Fitch. A good online insurance quote provider will give you quotes and ratings of each life insurance company so that you are able to make an informed decision. They also help you shop around for the best deals. You can… Read more »

13 years ago

Even though more companies are now offering live quotes on their websites, many independent agents that work with some of the best known life insurance companies in the industry can’t sell life insurance that captive insurance agents can. What does this mean for the consumer? They need to shop around both online and through their local agent(s).

13 years ago

I think point #1 is the most important and often overlooked tip. Too often people think that cheaper is the best option. You need to make sure you understand what you are getting and what you are NOT getting for the price.

Kevin Mulligan
13 years ago

@Carlos: Cut rate insurance is often cut rate coverage, right?

8 years ago

Great and very informative post, thanks!

10 Things to Know When Buying Insurance Policies

by Andy Tenton time to read: 2 min
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