Shopping your insurance every year is not always best for you
Why is shopping your insurance every year is not always in your best interest?
Insurance rates, along with everything else in my life, are increasing every year. So, it’s only natural to think about shopping your insurance rates.
A good rule of thumb is to shop your insurance at a 3- or 5-year time. But not every year.
Why?
Well there are renewal discounts that you lose out on by shopping every year. Those discounts are generally not seen till the 3rd or 5th renewal.
When you are shopping for the new carrier, you’ll be rated based on the length of time that you were with your previous carrier. So being with your previous carrier for 5 years or longer will allow you to get a better rate from the carriers you are shopping with then if you had only been with them a year or less.
In addition, there maybe something that you qualify for such as accident forgiveness or diminished deductible. These are not available when you have a new policy but they are earned the longer the policy is in effect.
For commercial accounts, a lot of the pricing is determined by the underwriter. Therefore, when they are reviewing an account and that account has been submitted to them for numerous years but never written with them, they tend not to give their best rate or any rate on the account.
Also, by shopping your insurance annually, the carrier is afraid that if they write the account they will only keep it 1 year. So they would not be able to make a profit on the account in that time. There is a cost to the carrier to pull the consumer reports, underwrite the policy, prepare proposals and to mail and issue the policies. They do not want to spend the money to do that work knowing that there is a good probability they will only keep the account for a year.
How do you know if you have a fair insurance rate?
By working with an independent insurance agent like Huff Insurance. W work with several different carriers. So this let’s us get a handle on the marketplace.
We can tell if a rate is out of line. Or if the carrier is on the front end or the back end of rate increases. We will share what we are seeing in the marketplace.
Sometimes insurance carriers have filed for rate changes, but they are not in effect yet. So we might know that shopping your insurance may save you 5% now. But if they have filed for a 25% rate increase, your renewal will be much more than where you are now.
You need to have a relationship with an agent that you trust. An agent that you feel is looking out for you best interest. No two policies are identical. So, moving from company to company you may lose a little and gain a little.
Remember the true cost of the insurance is not just the premium you pay but also the cost of deductibles and uncovered losses. Shopping your insurance every year may reduce the price. But you may have increased the cost of insurance. So keep an eye on your coverage and deductibles.
If you are looking for this type of relationship with your agent. Then give us a call. We will be happy to discuss the insurance program for your business or personal insurance needs.