Tips on Buying Insurance
Before shopping for an insurance policy:
- Determine what type of insurance policy you need.
- Determine how much insurance you need.
- Determine what you are willing to pay or can afford to pay for the insurance.
- Determine how much insurance you already have.
- Consider what insurance may be available through other sources such as your employer, spouse, professional association membership, and credit card companies.
- Become familiar with insurance terminology.
After you have considered the above, you may want to consider the following guidelines in shopping for an insurance policy.
Seek Objective Information
Information is available to you from a number of objective sources. A search on the Internet can lead you to insurance companies’ websites and consumer websites with information about insurers. The website of an insurance company can provide you with general information about the company and its products. It may also provide options for customer service and premium payment. These sources include public libraries, consumer groups, consumer publications, and the Division of Insurance. On page 20 of this guide is the section titled “Where to Go for More Information,” which includes a list of companies for researching information that you may find helpful.
Check the yellow pages of your telephone book for insurance companies and producers in your area. You may also want to contact your relatives, friends, and coworkers for recommendations on insurance companies and producers. Ask them about the price of their insurance and the service they have received. Also, you may want to contact our Anchorage office at 269-7900 to find out if we have any complaints on record about your chosen insurance company.
Compare Premiums for Similar Policies
Companies may charge different premium rates for similar coverage, and the division suggests that you compare the prices of several insurance companies’ policies before actually purchasing a policy.
You may want to consider the following when comparing premiums:
- Consult the current edition of the division’s Automobile Insurance Guide or Homeowners Insurance Guide for help in determining which insurers are doing business in Alaska. The premium examples in the guide can be used to make comparisons between companies, but should never be substituted for premium quotations made for you by an agent or insurer.
- Contact several insurance companies or producers and provide the same information to each producer or insurance company. Ask them to provide estimates of the premiums for the insurance coverage you are interested in purchasing. If a particular company provides a premium estimate for a similar policy that is much lower than the estimates provided by other companies, be wary. Be sure to compare the coverage provided by the lower cost policy to the coverage provided by the higher cost policy to be sure that the lower cost is not due to less coverage. You may want to obtain additional information about the company before purchasing the coverage to assure that the company provides the level of service you want and is properly licensed by the Division of Insurance.
- Price should be only one consideration in purchasing insurance. It is also important to consider the quality and level of service, as well as the coverage provided in the policy. Some consumers may be willing to pay a little more to stay with a company that has provided good service.
- Many insurance companies let you pay on a monthly basis or have a payment plan that allows you to pay your premium over a period of time for a small service fee. In some cases, an entity called a premium finance company will lend you the money to pay the premium. If you finance the premiums, the total amount you pay for your coverage will be larger due to the interest charged on your loan.
- If your producer is representing you as a broker, factor any broker fees contained in your written contract with the broker into the total cost of the policy. Once your policy becomes effective, no portion of the broker fee is refunded to you if the policy is cancelled.
- Remember that premiums are only one component of the cost of permanent life insurance. Interest rates and methodology as well as mortality and expense charges are important components of the true cost of the policy.
Completion of the Application Form
- Fill out your application completely and honestly. Omissions or untruths may allow the insurance company to turn down a claim or, depending on the consumer’s intent, may be a crime.
- Read the application before you sign it. If your producer helped you complete the application, be sure nothing was overlooked. Your signature on the application certifies that the information contained in your application is accurate and that you know of the contents.
- It is a good idea to keep proof of your payment for insurance premiums. Ask for a receipt and if mailing a payment, use check or money order. Never mail cash. Make sure that all receipts and checks show your policy number and the name of the insurance company providing coverage. All receipts should be signed and dated by the producer or insurance company representative receiving the payment from you. As evidence of payment, keep all your receipts and canceled checks in a safe place for the duration of the policy.
Ask for a copy of your application. When you receive your policy, compare your application and any premium quotation you received to the policy that was issued. If you discover any differences, contact your agent or insurance company immediately.
In property/casualty insurance, some producers are given the authority to issue binders. A binder is a temporary proof of insurance and is only valid for the number of days indicated on the binder. If your binder is about to expire and you have not received your policy, contact your agent or the insurance company to verify that you have coverage and obtain a replacement binder. Binders are not generally issued in life and health insurance.
An Insurance Policy is a Legal Contract
Your insurance policy is made up of two general parts. The first part of the policy (which is often the first page) is the declarations page. The declarations page lists your name and address, the name and address of the insurance company, and specific information about the policy you purchased showing what is being insured. It will list the liability or policy limits that were purchased, any deductibles, and each endorsement that is attached to the policy. The second part of the policy includes the actual contract language, which clearly describes both the insurance company’s rights and responsibilities as well as the policyholder’s. Certain general provisions are required by law, but policies can be very different. It is important to read any policy issued to you as soon as you receive it. If you have questions, contact your producer or the insurance company for clarification.
Some insurance companies allow a 10- to 45-day period in which to review the insurance policy and decide whether or not it is the policy you need or want (often called a free-look period). If you are replacing your policy, do not cancel the old one until the new one is in effect.