How to Review Insurance Proposals

If you own a house, rent an apartment or have a car or a motorcycle, you probably have insurance. When you're shopping for insurance, agents and brokers will offer several proposals for you to choose from. Don't allow cost to be the only factor you consider: you must take a lot more into consideration if you want to make the best choice possible.

Instructions

1. Compare insurance company ratings. After all, if you're going to rely on your insurance company to pay claims when the need arises, you must check their financial stability to ensure yourself that they'll be around. Obtain a copy of the company's financial rating using Standard & Poor's, A.M. Best or Moody's--three companies that track the stability of financial institutions. Find links in Resources.

2. Review the valuation clause. Find out whether the insurance policy will figure the value of your losses based on replacement costs or actual cash value. Replacement cost is the cost to repair or replace the damaged items. Actual cash value is the depreciated value of the item. Replacement cost will make you whole by giving you enough cash to replace your damaged property at the current market price, while actual cash value would mean that you may have to reach into your pocket to make up the difference between the actual cash value and the current cost of replacement.

3. Check the deductibles. Having a low deductible is an attractive feature, but it costs more to purchase an insurance policy with low deductibles than one with high deductibles. You have to review the premium savings versus your ability to pay out of pocket expenses to finance the deductible for each and every covered claim.

4. Find out about the claims process. If you are new to buying insurance and feel you need hand-holding when it comes time to report a claim, select the insurance proposal that offers human customer service rather than the proposal that offers an automated claims reporting system. Most people don't think about the claims reporting procedure until it's too late.

5. Analyze the premium. Reviewing the premium should be the last step in evaluating insurance proposals. The policy with the lowest premium may not always be the one that provides the best coverage, but, all things being equal, premium costs may be a good tie-breaker..

Tips & Warnings

• When it comes to insurance there is no such thing as a silly question. If you're not quite sure about something in a proposal or in one of your existing policies, contact an agent who represents the company and have her explain the coverages to you in simple terms.

Resources

• Standard & Poor's
• A.M. Best
• Moodys