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Top 10 Questions To Ask Your Insurance Agent

Buying a home will probably be the single largest purchase you will ever make. In many cases, it is also the singular largest asset you will own.  Ask yourself this question: “If I were to lose my home in a catastrophic event will I be more concerned about the premiums I was saving or the ability and reputation of the company that will now come to cover my losses?” Saving a little in the way of premium at the expense of proper and adequate coverage may not be your best option.

In today’s competitive world there is a myriad of choices among insurance carriers and products—including the particular policies, riders, deductibles, and exclusions of such products.  There are also important customer service differences in agents and in their office staffs.  Establishing a relationship with a good agent who is backed by a reputable and proven insurance company is essential.  Remember, a professional agent will be more concerned with helping you obtain the right coverage than selling you the cheapest coverage available; and with their industry knowledgeable and expertise they will be able to help you:

  1. Ask the right questions,
  2. Point out gaps in coverage that you might not otherwise see, and
  3. Guide you in making the best policy choice.

To help you navigate through this somewhat confusing but important aspect in purchasing a home, we at Arizona Network Realty and ArizonaRealEstate.com, have invited JoAnn and Del Alvarez from State Farm to help us put together an in-depth questionnaire to purchasing homeowners insurance titled the, “Top 10 Questions To Ask Your Insurance Agent.”  JoAnn and Del have been helping homeowners for the past 30 years and own one of the most successful State Farm offices in the East Valley.

1.     What is the Company’s Financial Rating (OR in other words, is the company financially sound)?

As alluded to in the opening paragraphs, not all insurance companies are created equal nor on the same financial footing.  Be sure to inquire about the carrier’s financial strength and presence in the market you are buying your home in.  Just because a carrier has been around for a long time does not mean the same as being around in your State. Review their history and their claims paying record. For more information, check with the National Association of Insurance Commissioners (“NAIC”) or call your State Department of Insurance (for the state of Arizona contact the Arizona Department of Insurance).

2.     Replacement Cost versus Depreciated Cost. What type of policy am I buying?

When purchasing a homeowner’s policy, remember to consider the effect of inflation on the value of your home.  Some policies only cover the initial purchase price of your home, while others include the actual replacement cost.  Even in depressed markets, the cost to replace or rebuild your home does not march step in step, therefore, be sure to ask about a Replacement Cost “(RC”) policy.  In addition make sure your agent explains to you how the policy pays in the event of partial loss and in the event of a total loss.  The agent should also clarify any sub limits that might apply to a loss.  It is always a good idea to be prepared with as much information about your home as possible. Remember, it is ultimately your responsibility to make sure your home is properly covered. Look at the coverage first, then look at the premium.

3.     Is My Personal Property Covered?

Similarly to the cost of rebuilding your home in the event of a loss, be sure ask your agent to explain the protection and exclusions for personal property through a Replacement Value (“RV”) rider.  In the event there is a partial or catastrophic loss, having a RV rider in place can save you thousands of dollars in home furnishings and other personal property items.  Even if a RV rider is provided in your policy, there may situations when the rider will not apply.  It is always wise to have you own personal inventory of your personal property. Videos work well and are quick, but remember it is up to you to prove the value of an item after the loss. A good claims department can help you in this process. But here, more is always better. Ask your agent to review and explain what items have limited coverage (i.e. firearms, business property, jewelry and furs, computers, etc).  Always ask about what is excluded from coverage. Few things are worse that thinking you have coverage only to find out you don’t!

4.     Does the Carrier Have On-line 24 Hour, 7 Days A Week Service?

We live in society that wants immediate results and service. After all, you deserve it. Inquire with your agent about how the carrier and the agency conduct their business. When the agent has gone home and the lights are turned off for the evening, who will take care of your service needs? What if you buy a car at night and need evidence of insurance? What if your car broke down and need a tow? How are these things handled by the carrier?

5.  What Is the Procedure for Filing a Claim?

It is good to know how claims are filed. No one wants to file a claim. And most claims often happen after the agent’s office is closed. Do they have 24-hour claims service? Can I file a claim and service my policies online? Ask the agent to explain what options are available for filing a claim. The agent doesn’t control what and how claims are to be paid, but they certainly can be an ally when a claim goes bad as they sometimes do.  This is another reason to ask about the agent and his/her staff.

6.  How can I save on my policy premiums ... Are there any discounts available?

By combining auto, home, and life insurance with a full line insurance company you should expect to receive significant savings on your total insurance premiums.   Not only will you save money, but also by combining all your insurance needs with one full line insurance company you’ll save you a lot of time and frustration by working with one carrier.  You may also want to consider a higher deductible or installing a security system.

7.     What about Flood Insurance?

Most homeowners' policies will cover water damage, but flood damage is almost never covered without a specific flood or disaster policy in effect. Ask the agent to explain the differences between these two types of policies, and the advantages and the need of carrying flood or disaster insurance.  If your home is being financed, then your lender will complete a flood certification.  If the flood certification indicates your home is located within a flood plain, your lender will require you to obtain flood insurance.

For more information about flood insurance you may also want to check out (get links from Buyer’s Guide):

8.     Is a High Deductible Policy worth the savings?

Higher deductible amounts mean you’ll save on monthly insurance premiums, but pay more out-of-pocket when filing a claim.  It’s best to ask your agent to provide several comparison quotes at different deductible amounts, and then weigh the savings against the potential out-of-pocket costs.  Only you can best determine if the higher deductible is worth it or not, but having the various quotes will help you make the best decision.  You’ll also want to have your agent explain what a “percentage deductible is and how it works as well compared to a flat rate deductible.

9.     Do I need Umbrella Policy Coverage?

We live in a very litigious society. What was one thought and accepted as “adequate” coverage is no longer enough.  Umbrella coverage is extra liability insurance above the standard limits of your home, auto, or boat policies that protect you and your assets form major lawsuits and judgments. The reason to buy insurance is to protect the assets you have worked so hard to accumulate. One event, if not properly insured, could wipe out a lifetime of work, sacrifice, and savings.

10.     What Are the Advantages/Disadvantages of Installing a Home Security System?

In addition to savings you’ll receive by combing your various lines of insurance policies with a single carrier, many insurance companies will also offer a discounted homeowner’s rate if you install a home security system.  Other home discounts might also be available so be sure to ask.  Consider the savings on the policy but more importantly, consider the potential increase or cancellation of a policy if there are excessive claims. Security Systems work and deter and so having one installed could save you twice.

Again, I’d like to acknowledge and thank JoAnn and Del Alvarez of State Farm Insurance for their contribution to this blog post.  We hope you find the information helpful to you as consider your next home purchase or looking for ways to save and improve on your current homeowner’s insurance.

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