Everyone feels the need to be thrifty these days. One way to be penny-wise and pound foolish, however, is to "cheap it out" with your insurance coverage. This series of brief articles is designed to identify some rather common risks often ignored in the search for the cheapest coverage. Failing to identify these risks and obtain the necessary coverage can have catastrophic effects.
There are three important factors in selecting a residential (home) insurance policy: coverage, premium cost, broker / agent service and insurer financial strength.
In this article, we will look at broker / agent service.
Should I use a broker or an agent?
A common misconception is that insurance agents / brokers will always try to sell you every kind of coverage available. Wrong. Insurance agents and brokers generally will try to identify common risks and get you coverage for these risks but often, their endeavor stops there. They may not be able to obtain the coverage you need.
Let's begin by understanding the critical difference between an insurance broker and an agent. In the insurance industry, this distinction is dramatically different from the real estate field.
An insurance broker can place coverage with a number of insurance companies who may offer a number of different types of coverage. The broker also commonly has the authority to determine immediately whether you will be accepted for coverage while an agent typically must submit an application to the carrier and await the carriers' decision on whether or not they will accept the application.
An agent, on the other hand works for one single carrier, even though some carriers attempt to style their agents as "independent contractors." In truth, agents work for one insurance company at a time.
Verify the License
Finally, always make sure the insurance broker or agent is legally licensed to operate within your state. This may seem obvious but there are countless records of people operating insurance agencies, collecting premiums and never actually issuing insurance coverage on behalf of a carrier.
Most states now offer license verification through the internet. Use a search engine to find your state's Department of Insurance Consumer Affairs. For instance, in California, you can verify licensing at http://www.insurance.ca.gov/license-status/index.cfm . In Texas, http://www.texasonline.state.tx.us/NASApp/tdi/TdiARManager . In Florida, [http://www.floir.com/ac/is_ac_index.htm].