Buying Insurance: A Price vs. Coverage Debate

by | Mar 8, 2019 | Auto Insurance, Homeowners Insurance, Independent Agent Advantage, Personal Risk

Image Credit: all know insurance is not an exciting purchase. No one feels giddy after buying a new insurance policy, or decides to spend a Saturday afternoon on an insurance shopping spree to lift their spirits. Typically, the insurance buying process is a necessary part of making a large and thrilling purchase, such as a new home or vehicle. I’m not here to pretend that buying insurance is as exciting as a new wardrobe or new furniture, but I am here to tell you that buying insurance can be informative and satisfying if you take the time to do it the right way.

There is a lot of misinformation out there regarding how to buy and what to buy for insurance. Billions of advertising dollars are spent each year to convince you that insurance is a one-size fits all purchase and that you should spend as little time as possible on it. This is typically done with a clever commercial or a witty mascot, and the good ones create a buzz around the proverbial water cooler. This idea is also fostered by news outlets who give advice on how to purchase insurance as if it were as simple as purchasing a pack of gum. Ads are designed to sell you something, and media reports are often painting with a large brush, and thereby missing information that could be crucial for you to be properly protected. This leaves many people with the impression that insurance is simple, and all policies are the same, so they focus on price instead of coverage.Discussion illustration

The fact of the matter is that insurance is extremely complex, and the only people qualified to give you sound advice are those who work in the insurance industry. Insurance is not a one-size fits all purchase, there are many factors to consider. A qualified insurance agent can explain the different coverages your policy provides, and offer you coverages that you may have thought were automatically covered but must be purchased separately.

As with most things in life, you typically get what you pay for. A much cheaper insurance policy is probably not protecting you the same way as the more expensive option. Buying insurance on price alone is like buying a car based on price and not on what fits your needs. It is the equivalent of buying a compact car instead of an SUV because it is cheaper, then getting upset when you can’t fit your six family members into the car. The fact is, the compact car was never going to meet your needs, but you ignored the vehicle’s limitations because of the price. A good insurance agent will review your risks and tailor a policy to fit your needs, so they can find the best-priced “SUV” policy for you instead of sticking you into the “compact car” policy because it was cheaper.

Driving SUVWith that said, I am not here trying to tell you to spend as much as possible on insurance, because that is not the case. Insurance can be overpriced just like anything else. The key is to focus on the coverages first, then look at the prices for the policies that include all of the coverages you need. Keep in mind, insurance is covering some of the most expensive purchases of your life, so you should want to take some time to understand what you are buying and be willing to spend a little money on that protection. Insurance premiums are a fraction of the value of the item it is protecting, and if a claim were to occur it would often pay out far more than you have paid into the policy.

I find that when I take the time to explain to a client how their insurance works, and what they need to do to ensure they are protected, they leave feeling much better about the purchase. They are satisfied with what they have bought because they understand how the policy is protecting them. A more informed client means a happier client. Knowledge is the key to anything in life, and insurance is no different. Understanding how insurance works and what you need to protect your way of life will help you choose the best options for you, and will help you avoid buying that “compact car” when you need an “SUV.”

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