Insurance is often required by state law or even voluntary contract, but it’s better to think of insurance as a safety net instead of something you must have because someone else says so. Though the state requires you to have a minimum liability amount of coverage on your vehicle, it’s for your protection and that of other drivers, should you ever get into an accident. Sure, your mortgage provider will require you to have homeowners’ insurance for the lifetime of your loan, but if your house burned down, you’d certainly be glad that you had the policy. Finally, even though the Affordable Care Act requires you to have health insurance, it’s a good idea to have it anyway – everyone is susceptible to being sick or getting injured and without a way to pay for it, those medical bills could cause you to file for bankruptcy.
In addition to the coverage that may be required such as auto, homeowners, and health insurance, there are many optional coverages, and higher limits, that may be a better choice for your particular situation. It can be confusing and for that reason, we thought we’d explain the three options you have when shopping for insurance.
Directly from the Insurance Company
Your first option is to buy your insurance online or over the phone. When you purchase a policy this way, you’re “buying direct” from the insurance company. You decide the type of coverage you require, as well as what limits you need, and purchase them directly from the provider (insurance company). This method isn’t for everyone though, as many people aren’t confident in what coverage or limits they actually need. When going the company direct route, you will also be limited to choose from among the coverage types and limits offered by that particular company. Later on, when you need to make changes to your policy or file a claim, you will need to contact the insurance company over the phone, or make your changes online. While these companies do have phone and online support, you may never speak with the same person twice which is something else to consider. GEICO is a good example of this type of insurance provider.
Buy from a Captive Agent
Your second option is to buy from what is called a “captive” insurance agent. A captive agent is one that offers coverage through a particular company he or she represents, such as State Farm, American Family, or Farmers. Having an agent is great, because unlike going the direct route, you will have someone to talk to, someone that will help discover potential liabilities you may not be aware of, explain how to cover for them, and suggest suitable coverage amounts.
However, the drawback to this option is because these agents are “captive” to one insurance company, they can only offer the products offered by that single provider. If that provider does not offer a specific type of policy that you need, you will have to work with a different agent for that coverage or buy direct from a company. On the bright side, having an agent can advise you on your insurance needs and give you personal service and attention, but ultimately they represent the interests of the insurance company they represent, and not you.
Work With an Independent Agent
Your third choice is to work with an “Independent” insurance agent. Like choosing a captive agent, you do have someone to talk to and ask questions of. You also have someone that will take care of changes to your coverage, claims, and any billing questions you might have. However, that is where the similarities end.
The main difference between a captive agent and an independent agent, is that an independent agent represents many companies, not just one. Because of this, he or she represents your best interests, and are always watching out for you, not the insurance company.
An independent agents will quote your insurance needs with a variety of companies, ensuring you get the best value for your insurance dollar.
Another benefit is that because they work with so many insurance companies, they likely can offer policies for any type of coverage needs, whether that’s home, auto, life, or business insurance. As your life changes, they can advise you on keeping your coverage up-to-date, and if necessary, move your coverage to a new company due to underwriting rules or a pricing advantage. Regardless of how your needs change, you can continue working with the same agent for years to come.
Compared to buying direct or through a captive agent, working with an independent agents seems to be a logical choice. So while there are three major ways to purchase insurance, the differences in how well they serve you are vastly dissimilar. It’s convenient to buy online, but that convenience could cost you should you ever have to file a claim. Captive agents can be helpful, but they can’t match the personalized advice and service of an independent insurance agent.
Get the coverage you need at a competitive price give us a call at Heinen & Associates today.