There have been a lot of questions recently about the increases in Property & Casualty Personal Lines coverage, also known as Home & Auto coverage. I thought this might be an interesting time to explore the differences between an Insurance "Agent" and "Broker" and things you may want to look for in your policy.
Differences in Agents and Brokers
Agents - typically work for a single company. The Company name and logo are on the agent's office, business cards, and website.
Insurance sales agents help insurance companies generate new business by contacting potential customers and selling one or more types of insurance. An agent explains various insurance policies and helps clients choose plans that suit them. Names that come to mind for Property & Casualty might be State Farm, Allstate, Nationwide, Liberty Mutual and Farm Bureau.
Brokers, on the other hand, typically represent a number of companies and try to find the best fit for the client's needs from competing companies. Typically, the Broker has a business name on their office, business cards, and website.
Some names you may recognize for companies that use Brokers are Travelers and Cincinnati. I work as a broker and use about 20 different companies depending on the products and types of coverage.
Other companies use a combination of Agents and Brokers. For example, Liberty Mutual uses Agents to sell their Liberty Mutual products; but they use Agents to sell Safeco, a Liberty Mutual company.
What to Look For in your Homeowners Policy
Coverage Limits - Most important is Replacement coverage limits since this determines the amount of reimbursement you would receive for a total loss. This amount should be higher than the market value as it would cost more to rebuild a home that has been destroyed than to buy the same home. We recently provided a quote for a policy that under-valued the home by about $200,000.
Deductibles - Higher deductibles generally result in lower premiums. Current deductibles in many policies are $1,000 to $2,500 or based on a percentage of the Replacement coverage. For example, a $500,000 home with 1% deductible would have a $5,000 deductible.
Coverage Descriptions - Each policy is a legal document describing exactly what is, or is not covered. I encourage you to call your Company's Customer Service line and have them review the policy with you. We once lost a freezer of food only to find out later it was covered under our policy.
Reimbursement Requirements - What would be required to make a claim should you suffer a total loss? Sure, you remember the big things. But how will you ever remember all the items that make up a typical home? Here are two suggestions: 1) Video tape your home's contents from time to time. You can add voice to discuss purchase dates and cost for high dollar items or unusual items. 2) Go to the center of each room and take a photo of each corner. Then add photos of the high value or unusual items.
Liability - I like to think of liability coverage as the walls of protection around your castle. If you were sued, do you have enough liability coverage to protect all that you've worked for hard to build. I recommend $1,000,000 for all my clients and more for high net worth clients.
If you have questions, feel welcome to call me directly. If you would like to get a quote, I would need copies of your current declarations page, drivers licenses, and dates of birth.