No matter what your purchasing, the price is always a factor, but it should never be the only factor, especially when you’re purchasing an insurance policy. Price is important but it’s not nearly as important as the coverage that you are purchasing to protect yourself and your business. The problem with only considering cost is this, your insurance doesn’t matter until you really need it, and then you get what you pay for. Everyone wants a lower premium until it’s time to file a claim.
What am I Paying For?
Many insurance agents fail to adequately educate their clients on what their policy covers and more importantly, what their policy doesn’t cover. This lack of education can make individuals believe that insurance is just this irritating necessity that they must have. In many cases, people don’t ever think about their insurance policy until the moment they need it and, they also believe the only difference in policies is the price. This statement is completely false and therefore dangerous to the policyholder.
This lack of educating the policyholder is caused by various factors. First, insurance policies vary greatly from one company to the next as well as the service you receive from that company. Next is the knowledge of the agent issuing the policy as well as the company underwriting the policy and backing it.
How Much Coverage Do I Need?
Purchasing the appropriate insurance for your situation or individual needs is not like going out and buying a gallon of milk or going to fill up your gas tank. Milk is milk and gas is gas, the only difference is the price.
Insurance can be very complicated, and many policies are usually comprised of many various and distinct coverages all combined and sold as a single policy. Many people don’t understand this because they just weren’t told about the optional coverage available or what wouldn’t be covered in the event of a loo. Insurance is not a commodity, it is normally a base component that will then have riders attached to the policy that provides additional coverage. For this reason, the amount of insurance you need depends on you.
To explain the different facets of a policy, we will discuss automobile insurance. An auto policy typically consists of several separate coverages that are optional except for liability. Liability is a must! You can purchase coverage on top of your liability policy such as underinsured motorist protection, comprehensive coverage, collision coverage. Each coverage can be purchased with varying limits of protection. For example, Liability limits in the state of Texas can be as little as $25, 000 per person and up to $500,00 per person. The premium paid will reflect the coverage option selected.
Let’s say you have the minimum coverage of $25,000 in liability and you slam your vehicle into a $100,000.00 Mercedes Benz and you total that car. In the accident, you also injured the two people that were driving in the Mercedes. (These are personal injuries). The $25,000 liability coverage you carry is not going to cover the car and medical bills from this accident. You are liable for the amount of the loss that your insurance will not cover. This is the perfect example of “you get what you pay for”. You wanted a lower premium but now you can’t cover the amount of the loss.
Your property and casualty policies also have minimums and limits as well as optional coverages. All policies have exclusions and optional coverages, so on a P&C policy, some of the optional coverages pertaining to an investment property policy include terrorism, wind, hail, flood, and earthquakes.
What am I Not Paying For?
No matter who your policy is with, it’s not only important to know what coverage you’re paying for, but it’s more important to know what you’re not paying for. These are called exclusions in your policy. People who shop around trying to find that insurance company with the lowest policy premium will also find that they are reducing or rejecting key coverage. So, when the insured is at fault and is liable for the loss, doesn’t have enough insurance to cover it then their personal assets may be at risk for liquidation or seizure, and this is where the danger comes in. Focusing solely on the price means you will be giving up coverage and running a real risk of not having enough insurance in the event of a loss.
It is reasonable and expected to consider the cost when purchasing an insurance policy but it is dangerous to make cost the only consideration because you will be giving up important coverages and the potential cost of an uncovered loss could be much more money than you had saved in taking the lesser policy.
Contact APIA to find out how your investment property policy can be tailored to your individual needs and we promise that you will be well informed and educated on your coverage. For more information about APIA and their insurance options, visit http://www.apiaprotects.com/