Why You Need Insurance
2019 Personal Insurance Resolutions
Avoid These Insurance Mistakes In 2019
You feel the hit every time your insurance premiums are due—or at least your bank account does. And year after year, the hit only gets bigger. Insurance premiums increased an average 8.6 percent in 2019, and the 2020 rate hike is still unknown.
All this can make you want to run to your insurance agent and find the cheapest policy possible. But is that the right decision? When it comes to insurance, the money you save in the short term could end up costing you in the long run.
They Say You Get What You Pay For
And you know what? They’re right. If one version of a product is cheaper than another, you know that something is lacking, even if the only difference is the presence of a brand name. When you pay more, you get more.
For an insurance company to offer you the lowest rate on the market, they have to do one of two things: take on more risk than their competitors are willing to shoulder, or take something away from you.
Spoiler alert: they aren’t taking on more risk.
That means that their economic policies are lacking something. Depending on what that something is, the cheaper cost might be worth it. Or it might see you losing money down the road.
What Those Cheaper Policies Are Leaving Out
Some of the ways insurance companies cut costs are of little consequence to you. For example, they might be a small company and save money on overhead with fewer offices and employees.
Unfortunately, most of the ways they cut costs to make their packages more economical will have an impact on you—possibly a very big one.
Some examples include:
- Reduced coverage: You pay less because you’re getting incomplete coverage.
- Higher deductibles: You may pay less per term, but in the event you need to file a claim, you’ll be covering more out of pocket.
- Greater worry: You know that whatever you’re saving money by not paying for may come back to bite you.
- Poor service: You can figure that if the costs are low, the company isn’t employing as many agents and adjusters as their workload demands.
- Rising rates: If you’re starting at the bottom, there’s nowhere to go but up—and up, and up. Expect your cheap policy to become pricy within a year or two.
- Lower limits: Lower limits means that your liability risk becomes significantly higher.
Just How Cheap Insurance Can Cost You
All of this seems pretty abstract, so let’s create a scenario that makes it clearer:
You’re looking for a small business policy that offers liability coverage. You know that people can be sue-happy and you want to be sure you’re protected. You sought out policy quotes and find one that’s significantly less than the others. Happy to save money, you opt for the cheapest policy in the bunch.
One day, someone is injured at your business. They’re taken to the hospital to be treated and their medical bills total over $50,000. Once out of the hospital, they sue you for their medical bills, lost wages, and general pain and suffering, seeking $200,000. Your premium is low, but your deductible is $10,000, so there’s a lot you suddenly need to pay out of pocket.
That $10,000 is a hit, but there’s still a chance you’ll recover from it. You might need to take out a small business loan just to cover it, but depending on how well your business is doing, it’s a storm you can weather. However, things get worse when the judge rules against you, and you discover that your liability limit is way less than what you owe on the court judgment. As a result, your business closes, and you’re still on the hook for the judgment.
This all-too-common scenario doesn’t have to happen to you.
Better Ways to Save
Just because opting for the cheapest policy is too risky doesn’t mean there aren’t other ways to save. Some things you can look into include:
- Companies offering claim-free discounts
- Taking steps to minimize risk that result in lower premiums
- Bundled policies with the same company, resulting in a lower price
- Opting for a policy that falls in the middle of the price range rather than one at the bottom
- Getting a custom policy so you’re not paying for extras
We understand the temptation to save money whenever possible. And in many cases, the more money you save, the better. However, insurance coverage is the exception to the rule. Before you let yourself feel tempted by low premiums, ask yourself what the policy is leaving out, and how it could potentially cost you.
Talk to the Agents at Leap | Carpenter | Kemps Insurance Agency
We understand that insurance can sometimes seem like a cost that you or your business can’t afford right now. But we also know that you can’t afford not to. At Leap | Carpenter | Kemps Insurance Agency, our dedicated agents can make sure that you get a policy that’s right for you and your budget. Contact us today to find out more.