9/12/2012 4:37 PM ET|
When to pay more for insurance
It's worth paying for the right coverage or the right insurer. A higher premium makes sense if it gives you a policy that meets your needs.
Price isn't everything when it comes to shopping for auto and homeowners insurance. While getting a low monthly premium matters, sometimes it pays to go with the pricier plan. Whether you need additional coverage, want a lower deductible or perceive that one company is better than another, there often are good reasons to pay higher premiums.
"Insurance is really about peace of mind and feeling like you are truly protected," says David Isaac, a senior product manager at MetLife Auto & Home. "The company offering the cheapest policy is not always able to provide the coverage the customer needs."
Here are five good reasons why you may decide to buy a more expensive policy:
1. Expanded coverage
Your car and your home probably are the most expensive things you'll ever purchase, so having the proper insurance coverage matters. There are many low-cost policies available, but paying more for broader coverage often makes sense.
With auto policies, you can purchase collision and theft insurance, but you may also choose to pay for accident forgiveness coverage, which ensures that your premiums won't go up following a collision.
As for homeowners insurance, many policies don't include valuable-articles coverage, which provides more coverage for personal belongings than a standard homeowners policy does. If you own a lot of expensive items, such as jewelry, specialty silverware, furs or coin and art collections, you may choose to pay more for such protection, says Jim Fiske, the vice president of marketing at the Chubb Group of Insurance Cos.
2. A lower deductible
Paying a deductible is a fact of life when it comes to insurance, whether it's $500, $1,000 or $2,000. The amount you agree to pay before your insurance kicks in helps determine how much your insurance premiums will be.
"If you have a bigger deductible, you are saying you are willing to pick up a bigger piece of the exposure," says James Whittle, the assistant general counsel and chief claims counsel at the American Insurance Association, a trade group. "If you don't think you have cash on hand, you might want to have a smaller deductible and pay more of a premium over the course of six months."
3. Customer service
If you have to make a claim, you'll want a quick and easy claims process. According to Robin Smith Westcott, Florida's appointed insurance consumer advocate, it's common for people to pay more for insurance policies if the customer service is top-notch or offers an extra level of convenience, such as the ability to file a claim or access documents online.
"There are differences between companies and the way they handle claims and their responsiveness," says Westcott. "A lot of times people really like the ability to access or file claims electronically."
Whittle says consumers are willing to pay more for what they view as better customer service, whether it's the insurer coming to you when you file a claim or fuel delivered to your car if you run out of gas.
4. The brand name
For some people, a well-known brand provides peace of mind. There's a segment of consumers who are going to buy from the insurance company they are familiar with, even if it means they pay more. Even so, Westcott says consumers need to cut through marketing spiels to make sure they are getting good products.
According to Bill Wilson, an associate vice president for education and research at the Independent Insurance Agents & Brokers of America, paying more for a brand-name insurer is OK if that company has a solid reputation. He notes that consumers don't have to worry about claims going unfulfilled if a lesser-known insurer were to go bankrupt. "Most states have guaranty funds that cover claims, within limits, if an insurer goes belly up," says Wilson.
5. A good track record
Most insurance companies provide coverage in the event of a natural disaster, be it a hurricane, tornado or wildfire. People may decide to pay more because their insurer has experience dealing with calamities.
According to Westcott, some homeowners are willing to pay extra to tap an insurance company's expertise with disasters, such as how quickly it can get adjusters to the scene.
"In the event of a loss, you want (an insurance company) with knowledge and expertise," says Fiske.
The Insurance Information Network of California offers advice on how to make sure your insurance is adequate when disasters strike.
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