Legacy Digest
Don’t Be Fooled: 3 Ways Some Insurance Agents Lower Coverage To Create “Savings”
If you’re looking to shop your home or auto insurance with a new agent, you might think that the only thing that matters is price. Yes, we agree, saving money is important! However, it is not the only consideration. If you’re paying for insurance at all, you want the insurance to actually be there to pay for your claim when you need it. If you agree that coverage matters, you need to keep an eye out for these three ways some other insurance agents will try to “save” you money by lowering your coverages without you noticing.
Changing Deductibles
****When you need to file an insurance claim, there’s typically a deductible – an amount of money that you are responsible for paying from any given claim. Insurers will typically deduct this amount from the claim settlement check. If you have a $1,000 deductible, then you are responsible for $1,000 and the insurance company covers the rest. You can lower your premium by increasing this deductible, but be aware that this is going to mean more money out of pocket when you do file a claim. Some agents will even switch you from a fixed cost deductible to a “percentage” deductible (e.g., 1% or 2% of a dwelling limit). You may not notice, or you think you’re getting a better deal, but if you have a $500,000 home, you may have just increased your deductible to $5,000 or $10,000 before coverage kicks in. This will save you money on your regular premiums, but you’ll be in for a big surprise when your big claim results in a much smaller reimbursement than you were expecting. If you don’t have the money saved up to pay for the deductible yourself, you may no be able to properly fix your vehicle or your home.
Removing Your Water Backup Coverage.
There are a lot of different line items on an insurance quote. It’s hard to know which ones are important and what they all do. One of the most common ways we see our competitors try to generate fake savings is by removing coverage for water back up. What is water backup coverage? Your normal homeowners policy likely does not protect against water damage when water backs up in your home due to a clogged sewer line, failed sump pump, or backed up drains. This is typically covered through an added endorsement for water backup coverage. Do you need this coverage? We think so. According to the Insurance Information Institute, water damage is one of the most common and costly claims that homeowners make. The coverage can also be costly, so removing it can generate savings. However, we recommend this coverage to all of our clients – especially if you have a finished basement. It’s not a good feeling when you realize there’s now a foot of water in your basement which cost you $50,000 to complete and you have no coverage.
Lowering Your Personal Injury Protection (PIP) Limits.
As of July 1, 2020, Michigan drivers had the option to lower their personal injury protection limits that affect how much coverage you have available to you if you are seriously injured in a catastrophic accident. Under the old law, everyone had unlimited PIP coverage for life. Now, you can elect to have less coverage just by filling out a little paperwork. While we strongly encourage you to visit our PIP Reform Resource Center or call us to help evaluate whether this is the right choice for you, we certainly do not want you signing away this coverage without even realizing it. Some companies may quote lower limit options without explaining the details, so be sure you check your PIP coverage limit on your quotation to make sure it matches your expectations.
These are just a few of the ways some agents may try to lower your coverage while trying to claim they were saving you money. There are many other ways we see this happen, including lowering liability limits, changing broad collision to standard, or removing policy perks like roadside assistance. While you are free to give up whatever coverages you want, you should at least make an informed decision. Before you sign on the dotted line, be sure to review your quotes carefully to make sure the details match up and ask questions about why certain limits were decreased and what that means for your insurance coverage. You deserve the right insurance coverage at the right price. That’s why you should rely on Legacy Partners to help make sure you understand your coverages before it’s too late!