Why Shopping for Insurance on Price Alone is a Lose-Lose

It’s important when choosing an insurance policy you think about more than just price. We’ve all seen the ads where insurance companies say “save 15% or more on your premiums.” If you think about it, how is that possible for all these companies? Sure, you could save some money by switching insurance companies, but there is more you should consider.

1. Higher deductibles

Some make the mistake of choosing a higher deductible to save money on their premiums. In the case of a claim, having a high deductible could have some serious financial consequences.

High Deductible

  • Lower premiums
  • Less coverage from your insurance company

Low Deductible

  • Higher premiums
  • More coverage from your insurance company

Let’s say your current policy has a $1,000 deductible, but another policy with a lower premium has a $2,000 deductible. In the case of a claim, you will have to pay an extra $1,000 out of pocket if you choose the policy with the lower premium. Is this something you can afford? If your answer is no, you’ll want a lower deductible.

2. Coverage

Insurance only pays for the insured losses outlined in your contract. For example, you could switch from a policy that offers replacement value coverage, to a policy that offers cash value coverage. This could save you money on your monthly premiums, but you may be paying up thousands of dollars out of pocket as a result of a claim. 

Replacement Cost Insurance

  • Pays for the full replacement cost of your items in case of damage or theft
  • Higher premiums

Actual Cash Value Insurance

  • You make up the difference between the depreciated value and replacement value in case of damage or theft
  • Lower premiums

In some cases, it may be better to pay a higher premium each month than to get stuck in a nightmare scenario. Cheaper doesn’t always mean better.

Life is constantly changing and so should your insurance coverage. The best way to save money is to speak with your agent or broker. You might find you have more coverage than you need in some areas, but not enough in others. Your broker can get you the best insurance policy for the right price.