What to Look For in an Insurance Agent

For about 25 years, I had my property and casualty insurance with Jim, an agent who only sold the products of a single, well-known insurance company. In the insurance world, he is called a “captive” agent. Why did I choose Jim? Like many other people, I used the agent my father had when I was young and bought my first car. Jim was very likable and the insurance company processed claims efficiently. I thought he provided good service.

Then I met Mike, an independent insurance agent. I told him I was concerned about the replacement coverage on my home should it burn down; I was concerned that the property damage limit looked low. Mike told me he would do a free estimate of how much it would cost to replace all but the land value of my home.

Mike’s estimate confirmed my suspicion of having inadequate coverage. He found that the cost of replacing my home was over $ 100,000 higher than the coverage I had through my “trusted” agent. If my home had burned down, it would have been a financial disaster. Needless to say, I switched over my homeowner’s and auto insurance to Mike. He got quotes from four quality companies and we settled on one that increased the replacement value of the home. Mike also doubled the liability insurance limit from $ 250,000 to $ 500,000. Even though my coverage increased, I saved $ 500 in annual premiums.

Does your insurance agent review your policy annually and alert you to changes? A recent article in Kiplinger’s Personal Finance magazine1 states that nearly two-thirds of homeowners are underinsured. Inflation of the cost of building materials has had a major impact on replacement costs. The June 28th issue of Forbes2 also has an excellent article on property insurance.

Just recently, I received a bill from my current insurance company. It showed an increase of almost
$ 700 in annual premiums — a 22% increase! It was an easy process to call Mike who researched other insurers and came back with three quotes. Again, Mike was able to save me hundreds of dollars per year.

Do you work with an independent insurance agent? If you have a captive agent, will he/she keep you informed of rate increases? Will a captive agent give you comparative quotes?

For me, quality service is the most important aspect of an insurance agent’s work. Cost is important, but secondary. Part of your agent’s responsibility is to keep you updated on changing costs and coverages. If your captive agent isn’t doing this, you should consider finding a trusted independent agent.

1. Kiplinger’s Personal Finance, p. 50, July 2010, “Upgrade Your Home Insurance.”
2. Forbes, p. 113, June 28, 2010, “Investment Guide.”