Do you have Gaps in your Home Insurance? Do you review your Coverage?

By Haig Artan  @HDAinsurance 18 December, 2013

Risk Assessment - Home InsuranceThink twice next time you are shopping to replace your quality home insurance contract seeking a cheap alternative which seems to cover you just the same!!!  The reality is that a consumer will shop around for about a half dozen quotes and pick the cheapest premium in a self gratifying manner that he or she has saved money.  In fact, it could be quite the opposite.

Each and every day consumers receive their renewal offers which arrive approximately 45 days prior to the expiration date each year; it is very usual for a homeowner to compare only the premium amount to the prior year and begin the mental process to shop around, save money and perhaps teach the insurance company a lesson for increasing the premium.   Perhaps, many of us have had the same thought if not acted alike at least once or twice!

Our first action should be to review the coverage and make sure that we have the sufficient coverage we need in the event of a loss.  In the event of a loss, there is a lot to be said about loyalty;  although insurance companies pay claims as interpreted by the contract, there are many times that coverage may be accepted or denied based on the interpretation of policy wording;  this is where customer loyalty could come into play.

Rather than you buying an insurance policy, you should view the transaction as ‘selling your risk’ to an insurance company in return for an Insurance Policy and a small Premium.  A consumer will never teach a lesson to a carrier by switching since if you cancel your policy,  you are alleviating the carrier of the risk.  Insurance companies are not permitted to make exorbitant percentages of profit due to regulations that govern the industry; it is common for carriers to suffer an underwriting loss from operations.

In most States, insurance carriers cannot increase the premium without a prior approval from the State Department of Insurance.  In the audit process during a new rate revision, the carrier is limited to a minimal percentage of profit after paying for the administration, underwriting, claims payments and acquisition cost of the policy.  A consumer may leave one carrier for a lower premium due to the annual timing of rate revisions simply to find himself or herself in the same situation on the next renewal with another company.  Premium is a figure calculated by professional actuarial firms that examine statistics and simply place a price on risk; insurance companies contract actuarial firms to conduct the research and help assess the financial risk.

If you speak to a knowledgeable insurance professional, they will explain your coverage, the available optional endorsements and the best method to insure your property properly at the lowest premium charge.    One should review a home insurance policy every 3 – 5 years and proceed very cautiously if a change of carrier is desired.