Cut-Rate Insurance May Cost You Much More | Finance > Insurance & Risk Management from AllBusiness.com
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Cut-Rate Insurance May Cost You Much More

Buying insurance is not like buying a TV or car. Insurance is not a commodity. It is a service.

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The insurance industry is in a prolonged "soft market." Prices are low, according to many, artificially low. One agent recently reported one of his client’s aviation policies was set to renew with a 30 percent reduction. Another broker bid the coverage and reduced the cost another 30 percent. The result? He lost the business.

Whether for home or business insurance, you frequently receive solicitations, phone calls from brokers and ads from insurance companies promising to save you money on your insurance. We also know that most business owners must evaluate each expense paid to cut costs, especially in today’s economy. However, buying cut-rate insurance and switching agents may cost you much more in the long run.

Insurance is your first line of defense against life’s calamities. After a loss, can your insurance carrier do these things?

  • Do they provide prompt and courteous service 24/7 after a loss?
  • Do they provide knowledgeable adjusters who can assist you in making important post-loss decisions?
  • Do they recommend a quality repair shop to repair your damaged car or equipment?
  • Does your carrier reimburse you for a suitable alternative business space if you are unable to occupy your building after a loss?
  • If you are sued after a loss, can your carrier provide a strong defense with skilled legal counsel? Do they keep you involved and up-to-date on the litigation?
  • Can they help you locate a trustworthy contractor if your building sustains damage?
  • Are they loyal to you even if you experience a few losses? Building longevity with one broker and one carrier can assist in this important issue.

Cut-rate insurance carriers cost less because they generally provide fewer services. Price should be only one consideration when you purchase insurance.  A serious loss can wipe out your business. Business owners need a highly respected, financially sound insurance company behind them when things go wrong.

Many businesses shop their coverage every two or three years. Now, with the market as soft as it is, consider asking your broker to price shop your coverage this year at renewal. But before you decide to change brokers, or switch to a new insurance company, give your current agent or broker one last shot at retaining your business. Right now, many insurance carriers are cutting premiums to retain business. They may be willing to compete head-to-head against other carriers rather than lose your business.

Your insurance carrier is your best defense if a loss occurs. Changing carriers, even if you have a bad experience with your current carrier on one claim, may be like switching seats on the Titanic. Talk to your agent if you have problems with claims handling. They can smooth out communication difficulties and assist you if coverage problems arise.

Don’t make a quick decision to save money without deliberation. Talk to your current agent if claims-handling problems arise. Agents can smooth communication difficulties and assist you if coverage problems arise.

Buying insurance is not like buying a new television or vehicle. Insurance is not a commodity. It is a service. Like any other service we purchase, we usually get what we pay for. We are all trying to save money in this difficult economy. However, purchasing cut-rate insurance may ultimately cost you much, much more. 

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