Shop for Right Policy
And You Can Save Big
By Morey Stettner
Special to The Washington Post
Tuesday, March 12 1996; Page D05
Despite spending thousands of dollars a year on auto and homeowners insurance, many people
don't know what they're getting. The typical insurance transaction unfolds in three steps:
1. You pay your premium.
2. You forget about it until . . .
3. You report a claim.
Then all hell breaks loose.
It's hardly a fair fight. In one corner, there's you. Your opponent is a huge, faceless bureaucracy
with more time, more experience, and more money.
Knowledge is power. You'll save money if you know how to buy insurance, prepare for a claim,
and negotiate wisely with the adjuster.
"The first step is to shop a number of insurance companies," says Robert Krughoff, president of
Washington Consumers' Checkbook magazine. "There are big price differences among
companies. A family easily can save $500 or more by shopping around," he says.
For auto and homeowners insurance, you easily can price-shop by asking an independent agent to
gather quotes from a few carriers. Compare these premiums with State Farm or other direct-writer
companies -- insurers that sell their products using their own exclusive agents.
If you haven't heard of the company, check with your state insurance department to confirm that
the insurer is licensed to sell policies where you live (District of Columbia, 202-727-7424,
Maryland: 800-492-6116, Virginia: 800-552-7945).
Also call a few highly regarded direct-response companies -- a type of direct-writer that sells to
customers via toll-free phone lines. These direct-response outfits may charge 5 percent to 15
percent less for their policies because they do not pay commissions to salespeople, but you lose
the personal service that a good agent delivers. Among the best, according to Standard & Poor
and A.M. Best, are Geico (800-841-3000) and Amica Mutual (800-622-6422).
In Maryland and Virginia, the state insurance department offers free rate-comparison guides
among competing companies (the District of Columbia no longer offers this service). If you belong
to any organizations such as credit unions or auto clubs, you may qualify for discounts by
purchasing coverage through your group.
When shopping around, remember to base your quote on the same deductible with each carrier.The higher the deductible, the lower your premium.
"Take as high a deductible as you can live with," says Krughoff. "The purpose of insurance is to
protect you from financial catastrophe, not to cover minor financial inconveniences.
"
You can save 25 percent or more on a premium if you opt for a $1,000 deductible (or higher)
instead of $100. This same rule applies whether you're looking at auto, home, or health insurance.
You can save nearly 30 percent on your annual flood insurance bill on your home, for instance, by
raising the deductible from $500 to $5,000. Your individual health insurance premium can be cut
by 20 percent with a $2,000 deductible instead of $500, although you will have to pay for all the
small stuff on your own.
A good way to cut your auto insurance bill by as much as 25 percent is to decline collision and
comprehensive coverages if your car is older than five years and the premium is more than 10
percent of the car's resale value. Most banks and public libraries have used-car guides, such as the
Blue Book, to help you determine a car's market value.
"When a car is five or six years old, you're paying almost as much for collision insurance as you
were when the car was two years old," says Krughoff. "But you're getting a lot less coverage for a
total loss."
There's a magic word that can unlock the door to saving even more money on your auto and
homeowner insurance: discounts. Most insurers offer a standard rate, but the premium goes down
depending on how many discounts apply to you. Aside from the obvious discounts reserved for
nonsmokers, good drivers, or for homes or cars with security systems, there may be others that
are less publicized.
For auto insurance, look into discounts if you just turned 30 or 50, if you have low annual mileage,
or if you're part of a carpool. For homeowners coverage, ask about lower rates for fire alarms and
dual-policy deals (if you insure your cars and home with the same carrier).
Each insurance company is free to create its own discounts, subject to state regulations. One
insurer's "good student" rate may reduce the bill by 10 percent, while a competitor may only shave
a few dollars off.
As a rule, automatically ask every agent, "Are there any other discounts I qualify for that will lower
my rates?" While the best agents will try to apply as many discounts as possible to your bill, they
may not do so unless you ask.
Once you've forked over your money to the insurance company, you probably hope you never
have to put it to the test by reporting a claim. Suffering a major financial loss almost always is a
traumatic event. The last thing you want is to face a series of hassles in order to get your check.
There are preventive steps you can take now that will make the claim adjudication process flow
more smoothly later. First, update your records. Make sure you keep your receipts, appraisals,
and bills in a safe place. When a claim strikes, you will increase the amount you receive from your
insurer by proving the value of what you lost. In the absence of such evidence to validate your
claim, the dickering can turn nasty.
"Read your policy and know what's covered," says Kevin Quinley, author of "Winning Strategies
For Negotiating Claims" (1995, Marshall & Swift). "That way, you won't distress over what's
covered and what's not."
Quinley also advises that you document everything from the moment you call to notify your agent
of a claim. "Take detailed notes on all discussions that you have with claim adjusters and other
representatives from the insurance company," he says. "The more documentation you can provide
the adjuster, the better chance you can get paid the full amount of your loss. Adjusters typically
need to justify to higher-ups why they paid a certain amount on a claim. You can make their job
easier."
Some homeowners who suffer major losses, from burglaries to windstorms, must estimate the
value of their personal belongings at a time when they are often emotionally drained and distraught.
Save yourself this extra grief by taking a detailed inventory of your property now.
Insurance agencies may have a form you can use to record the contents of your home, and
Publication 584 from the IRS includes a handy room-by-room inventory work sheet that not only
will help you prepare for a claim but also will speed the process of verifying losses for tax
purposes.
It's a good idea to take photographs of the contents or even use a camcorder to film each room of
the house. Remember to open all drawers and cabinets so that your belongings are clearly visible.
Don't forget items such as patio furniture, luggage stored in the basement, and holiday decorations.
Keep these photos or videos in a safe deposit box at a bank so that they are easy to retrieve if
your home is severely damaged. Also enclose a copy of the original plans of your house, which will
be a godsend if a contractor is needed to rebuild.
No matter how well you prepare for a claim, negotiating with an insurance company can require a
mix of finesse and raw muscle. Most adjusters are evaluated in part on how quickly they close
claims, so it's in their interest to get you to agree to settle. But don't rush into anything.
"As long as you keep good records and you can substantiate your claim, then don't take no for an
answer," says Shirley Rooker, president of Call for Action, a Washington-based consumer group.
"Escalate your argument within the company. You need to be able to prove why you're right."
Rooker recalls when her son got into an accident with a drunk driver. He wasn't seriously hurt, but
his car was a total loss. "The insurance company wanted to give us $600, but we had spent
$1,800 on brake work, getting the motor overhauled, and having it painted," she says. "So we sent
copies of our receipts to show exactly how much we spent on the car. We told the company our
next step was to get a lawyer if they didn't pay to completely fix everything, and we prevailed."
If you are not satisfied with how the company handles your claim, then try to get your agent to fight
for you. Also ask the adjuster if the company has an ombudsman or an executive in charge of
customer service that you can contact.
After you give the insurer ample opportunities to deliver on its promises and it still won't budge,
then call the National Insurance Consumer Help Line at 800-942-4242 (cosponsored by
insurance companies) for some advice on how to proceed. Also file a complaint with your state
insurance department, which may investigate the claim and put some pressure on the insurer to
reach a fair settlement.
As a rule, do not hire a lawyer until you have exhausted your options. You have stronger leverage
if you politely mention to the insurance company that you may retain an attorney. This usually will
spur the claim staff to work with you and be more flexible in negotiating a payoff. It costs an
insurer far more money and aggravation to haggle with a lawyer for six months than to simply cut
you a check now and close your file.
In all fairness, most insurance companies are trying harder than ever to upgrade their customer
service and improve their industry's low reputation. If you approach them with an open mind and
submit plenty of documentation that shows how much your claim is worth, then you should expect
a fast, fair settlement.
Morey Stettner, author of "Buyer Beware: An Industry Insider Shows You How to Win the
Insurance Game" (1994, Irwin Professional Publishing), lives in Silver Spring.
