“Buying Insurance, Part I” discussed getting insurance from a solvent insurance company. Part II discusses making sure that your claim is paid.
There are two key factors: 1) getting insurance from a solvent company; and 2) getting insurance from a reputable company which will pay your claims.
I. Buying from a Solvent Company
Part I emphasized the need to buy insurance from a solvent, solid company. This cannot be repeated too often.
You must make sure that your insurance company is solvent because its promise to pay claims in the future is only as good as its ability to pay those claims.
You should look for the following:
- Your insurance company should be licensed to do business in your state. In the event that your insurance company goes insolvent, then the state will step-in and take-over the insurance company’s policy obligations. This is covered in Part I. In the future installment we will discuss how the State takes-over an insolvent company and what happens to your claim.
- Your insurance company should be rated at least “A” by A.M. Best or a similar rating service.
- If you must go to a non-admitted company, then be sure that your company is rock solid. Again, check the company’s financial history and rating with A.M. Best.
II. Making Sure that Your Insurance Company Pays Claims
Going with a successful, solvent insurance company is not enough. You should go with an insurance which quickly and fairly pay claims.
This is very important for your own first-party coverages. You want an insurer which will pay your own claim quickly and fairly. For example, after suffering a fire to your house you want the claim resolved as quickly as possible so that you can either repair or rebuild. After suffering a loss you do not want an insurance carrier who will fight you on every penny. You also do not want a carrier who will look to deny coverage on any technicality or deny on a “gray area” of interpretation in the policy.
You should discuss the insurance company’s payment history with your independent agent. He will be in a good position to know which insurance companies pay claims fairly, reasonably, and quickly.
It is also important to discuss your needs with your insurance agent. Do you have a art collection? Does your business carry a large inventory? Have you rented-out your home and purchased a new home? These are all things that must be discussed and reviewed when buying insurance.
As a general rule a fair and reasonable insurance company will be more expensive than other carriers who compete mainly on price. You should not expect the cheapest carrier to be fair and reasonable on paying your claims. For example, Allstate’s rates for car and home are very competitive on price. It is well known that Allstate will fight to the death any liability claim made against you. However, on the same side of the coin, Allstate will fight you on your own claim for either collision or fire to your home. Therefore, a small savings in premium can be costly if you have a claim.
In the auto insurance field, some insurance carriers market to immigrant communities. For exampl, Countrywide markets to the Asian community. It offers the lowest premiums in the market. However, Countrywide has a terrible history in paying claims. It is very poor and slow in paying the medical and lost income claims of its own policyholders. Its claims representatives do not call back policyholders and their attorneys.
In sum, you get what you pay for. If you must go with the cheapest premium, do not expect first class claims handling.
If you have any questions, please feel free to call me at 800-581-1434.
Mark E. Seitelman, 10/2/08, www.seitelman.com.