Questions To Ask When Shopping for Insurance
So, you have made the decision to purchase insurance whether life, car, health, or homeowner insurance. This is a major financial decision and will benefit you greatly in the long run. You may be at a point where you need to upgrade an insurance policy because of life changes such as a new baby, a new business, or a new spouse. However, you may be a bit lost when it comes to understanding what to ask your agent. If you need pointers on what to ask your agent, below are a few basic questions to get you started!
What insurance products are best for me, and how much do I need?
Before you even make the decision to purchase insurance, it is important to understand the type of insurance products you will need.
Talk to your agent about your goals, wants, and needs to determine the type of products that suits your lifestyle and budget. A few general things to consider are:
- Your current debts;
- Cost of your children’s education;
- Your current assets, including savings and pensions;
- Pre-existing illnesses; and
- Any existing policies you have through your current job.
There are many online calculators that can help you to calculate the amount of insurance that you will need. However, it is also good to ask your agent this question. This allows you to have a personal conversation about your needs and wants, and allows the agent to consider personal circumstances that a calculator will not be able to. Many insurance agents are trained to assist you with financial planning and should be able to point you in the right direction.
2. What will be covered in my policy?
It is important to remember that different types of policies cover different types of events. It is also crucial to know what your policy can cover. A few things to ask about for different policies in and it is important to understand exactly what coverage you have.
If you are shopping around for homeowner insurance, you can ask questions such as:
- Do you have a policy that covers flooding?
- If my possessions are stolen, do you have a policy that can cover reimbursements for the full value of my property?
- Does the policy you are offering cover acts of God, i.e. hurricanes or tsunamis?
- Does my policy offer liability protection for damages caused to guests while they are visiting my home?
If you are shopping around for medical insurance, you can ask questions such as:
- Does my policy cover prescription medication?
- Does my policy cover dental and vision services?
- I would like to start a family, will this cover pregnancy, maternity, and new-born care?
- If I am in an accident, would my policy cover rehabilitative services to assist with injuries and disabilities?
If you are shopping for auto insurance, you can ask questions such as:
- Will my policy cover damages and injuries that I might cause in accidents?
- Will my policy cover damages caused to me by ‘hit and run’ accidents?
- Who is allowed to drive my car?
- Does my policy cover roadside assistance?
3. What will my deductible be?
Many people forget about this extremely important question when shopping for insurance, mainly because you only run into paying a deductible when something major happens. An insurance deductible is the amount of money that you need to pay for an insurance claim before your insurance coverage kicks in. For example, if your deductible is $500 each year, your insurance coverage will not kick in until you have paid $500 out of pocket for expenses. Knowing your insurance deductible comes in handy when deciding how much to put aside in emergency fund. If the amount is too high for you to comfortably afford at any one time, speak to your agent about other options for lowering your deductible.
4. What will the co-payment be with my policy?
This question is specifically important for health insurance. A co-payment (also called a co-pay) is the fixed out of pocket amount or percentage that you pay for health insurance AFTER you have met your annual deductible. Many insurance companies require a co-payment of 20% for each doctor visit. In that case, the insurance company promises to pay 80% for items covered in your health insurance policy. Similar to the deductible, this is important to know because it will help you to save properly in an emergency fund.
5. What will my premium be?
Simply put, an insurance premium is the amount of money that the insurance company charges you for your policy. This is usually paid on a monthly or annual basis. Everyone’s premium will be different because it is based on your personal information such as age, marital status, years to retirement, health status, type of insurance coverage, etc. The insurance companies build a risk profile for each client based on personal information to calculate premium amounts. It is important to remember that your premium may change over time depending on circumstances. For example, auto insurance premiums may decrease each year you do not have an accident. A key to finding the lowest premium is to shop around and find the company that seems most interested in helping you reach your financial goals. If you find a company you really like but the premium is too high, feel free to talk to your agent about things you can do to lower your payment. Knowing your premium is important for budgeting purposes.
6. If I fall on hard times and have to miss a few payments, how long will it be before my policy lapses?
Hopefully you never have to run into this issue but if you do, this is important to know upfront. A policy can lapse as a result of the policy holder not paying the premiums. When a policy lapses, the benefits in the policy are no longer active. For example, if you allow your auto insurance to lapse and you get into an accident, your insurance company is not obligated to cover your expenses. Knowing the amount of time you have before your policy lapses helps you to better prepare for hard times.
7. Can I bundle my insurance policies?
Bundling refers to buying multiple types of insurance policies with just one company. Often times, this allows you to qualify for discounts and other customer loyalty benefits. Bundling also reduces the hassle of having more than one insurance provider. Bundled policies and discounts varies between companies. When shopping around, look out for the best bundled policy that best suits your needs and budgets.
Having insurance is important, especially for the unknown. Remember, it is important to ask questions and allow your agent to clarify any doubts you may have about purchasing insurance. Read your policy in its entirety and pay attention to the fine print! Shopping around efficiently allows you to remain in charge of your money and your coverage. Try using these questions to GET MONEY SMART while searching for the right policies for you!