REAL LIFE EXAMPLE (From an article by David Lazarus, Los Angeles Times):

“When Dave Wilder and his wife, Lynn, surveyed the remains of their Running Springs house after it burned to the ground in a wildfire near Lake Arrowhead in October 2007, the thing that struck him most wasn’t the devastation, and it wasn’t the loss of everything they owned. Wilder said he bought his 1,758-square-foot house for $99,900 in 1984. It was originally insured by State Farm for about $90,000, or $51 per square foot.”

“Over the years, Wilder and his wife made improvements to the property, raising the insurance level to $202,000, or $115 per square foot.”

“’Each year, we always asked our agent if we had enough insurance, and he always assured us that we had good coverage,’ Wilder said.”

“But the $202,000 check he received after losing his house fell far short of the actual replacement cost. Wilder said estimates he received from contractors after the blaze were closer to $230 per square foot, or more than $400,000.”

SO, WHY ARE PEOPLE UNDERINSURED?

#1 – People don’t want higher rates

This relates somewhat to my last blog post – we all want to save money, but we know that cheap isn’t always the best. Here’s the truth, when I recommend an increase in coverage, it’s not because I think you have some extra money lying around, or that I’ve been eyeing a new set of golf clubs. It’s because I am confident that if your house burned down, the current policy wouldn’t cover you properly. In fact, I never recommend an increase in coverage without offering some ways to help offset the premium increase, like a higher deductible, or multi-policy credits. So if there is an increase in premium, am I cheering because I’m getting rich? Absolutely not. If a policy goes up $100.00/year, my organization will earn about ten bucks. That increase doesn’t even pay for the additional service required to conduct our annual reviews. So, as an insurance professional, if your agent wants to conduct an annual review, please, listen to him or her. They really are trying to help.

#2 –Your agent hasn’t ever contacted you to complete an updated coverage analysis

If this is true, FIRE YOUR AGENT. (If you don’t have an agent, that’s a whole other problem.) When I write an insurance policy, it is merely a snapshot of your risk profile. But life is not a still photograph, it’s more like a movie…well, really, more like an IMAX 3-D! My point is, if you’ve had the same insurance policy for more than 3 or 4 years, and haven’t made any changes or updates to it, you may be underinsured.

#3 – Unethical Insurance Agents want to make the sale

This is somewhat less common than most media outlets would want you to believe, but it does happen. Although I would never knowingly underinsure someone, there are agents out there who might not be as client focused as I am. They realize that people are shopping for price, and instead of educating their clients, they write bare minimum coverages to keep the rate low, and close the deal. This practice makes me ill, but it does exist. Here are the red flags to watch out for:

RED FLAGS –

• The agent only asks for a copy of your current insurance and doesn’t ask you anything about your home.
• The agent gives you just a price, without explaining any coverages or features.
• The agent uses an ‘extended replacement cost’ as part of the coverage limit. (example: if the agent says that the coverage limit is enough because you actually have 150% of that limit – they are lying…if you want an explanation, email protection@engleinsurance.com or call me at 877-544-8929)

#4 – Title and Escrow companies are trying to diversify

If your insurance was written through your escrow closing by direct mail, and you have no idea who your agent is, it might be time to shop around. One of my employees just bought a house. She received an offer for insurance from a company that is affiliated with the title company who provided her escrow services. On the surface, it looked like a decent offer. However, after she completed our comprehensive coverage analysis, she realized a few things wrong with the offer. First, she found that the offer had a total coverage deficit of over $300,000 across all coverages in the policy. Then, in the fine print, there were exclusions for things like swimming pools, trampolines, and animal liability (which is included in most preferred policies, and protects you if your dog bites someone, knocks them over, etc). There were also several other coverages missing. The point is, on the surface it seemed like a great deal, but once she realized all of the coverage deficits, the offer was setting her family up for a financial disaster. The beautiful thing was that she ended up writing her policy, with one of our preferred companies, and it was over $200.00 less than the offer from the title company. You don’t have to sacrifice coverage to save money!

Underinsurance is a real problem. You may never need to file a claim, but if you’re paying for insurance anyway, doesn’t it make sense to have a policy that actually protects you? You don’t have to sacrifice coverage to save money. For more information, or for a free comprehensive coverage analysis, please call me toll free at 877-544-8929 or email me at protection@engleinsurance.com

So, what I want to know, is when did cheapest, become the best? When did insurance become a commodity? It has always been something that is price sensitive, however it really all started with a certain Gecko, and grew from there… I’m a bit of a media junkie, and I can’t watch television, listen to the radio, or surf the web for more than 5 minutes without hearing or seeing an ad for what I like to refer to as “the big spenders.” They’re all telling me how much money they save their customers.

In 2007, These Big Spenders: Geico, Progressive, Allstate, and State Farm; collectively spent $1.5 Billion on advertising. Yes, that’s Billion, with a “B.” They spent $1.5 Billion to convince all of us that we should buy our insurance from the lowest bidder. In an era of Wal-Mart, Costco, and other discount and wholesale stores, we have all been brainwashed to believe that if we don’t get the cheapest price on something, that we’ve somehow shorted ourselves. Look at Flo in the progressive commercial – she’s selling insurance in a virtual big box store! I’m not saying that you shouldn’t shop around, but be sure you’re comparing apples to apples when it comes to your coverage. It doesn’t save you money if you’re paying a cheaper price, but sacrificing valuable coverage.

I see it time and time again. A potential client comes to me with their current insurance policy in hand. We review the coverage and undoubtedly find gaps, HUGE gaps in coverage. Just last week I was working on a homeowner’s policy where the client’s house was underinsured by $123,000. When I completed my comprehensive coverage analysis, we also found that she would greatly benefit from earthquake coverage. So when I ran the numbers, my quote turned out to be $142.00 more per year. For $142.00 more per year, she gets $123,000 more in coverage AND earthquake coverage. Here’s the kicker, we ended up increasing her deductible to offset this premium difference, and guess what… our annual premium was within $10.00 of their old policy, with MUCH better coverage.

With that said, I want to go back to my first question. If you knew, for a fact, that your home or business was going to burn down tomorrow, would you buy your policy from the lowest bidder? Or would you consult an insurance expert, to be sure you have the proper protection? My point is, most people have the attitude that ‘It’s never going to happen to me.’ Two years ago, one of my long time client’s home burned to the ground. He had plugged in his laptop to charge before he went to work. The laptop’s battery pack malfunctioned, overheated, and caused a fire. When he returned home, his home was nothing more than ashes and a few pieces of charred lumber. He told me, “I never thought I would actually use this insurance.” He received his check quickly, and without hassle, because over the years, we had recommended coverage increases, and policy changes to be sure he was adequately protected.

That’s exactly what an independent insurance professional does for you. It’s not about selling policies, it’s about building relationships, and providing ongoing protection counseling, not just at the time of sale. There are many of us out there who spend our days (and nights, and weekends) thinking about, reading about, and talking about insurance. Independent insurance professionals aren’t a ‘middle man,’ as some of the ‘big box’ insurance companies would want you to believe. We are educated, licensed, and experienced professionals who, instead of representing the interests of one, single insurance company, we represent the interests of our clients. The companies we represent, rarely advertise. Instead of advertising to the masses, our preferred companies provide us, the independent agents and brokers, with their premier insurance products. This allows us to work with our clients to create a custom insurance package; finding the best coverage, at the best price, for their unique situation. Not everyone fits into a cookie cutter policy.

If you would like a free protection review, please feel free to call my office toll free at 877-364-5380. Or send an email to Protection@EngleInsurance.com