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Overcharged for Insurance?

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Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency...

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Reviewed byJoel Ohman
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UPDATED: Mar 13, 2020

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overcharged

Like it or not, insurance takes a good chunk out of just about everyone’s budget. But what’s worse is being “overcharged for your insurance.”

Of course, the phrase “overcharged” implies price gouging of some kind, which probably isn’t the case in the largely homogenous insurance realm. Put another way, you may be paying too much for your insurance.

Here are a couple of things to look out for when shopping for insurance to ensure you get the lowest price possible.

Don’t be afraid to ask the following questions when you’ve got an insurance agent or representative on the phone (hopefully, an agent).

Getting That Right Price

1. Why do I need this much coverage? Whether it’s auto or life insurance; if you’re being offered coverage that seems a little heavy, ask the agent to explain why you need that much.

A college student with no assets and no income to speak of may not need the $1,000,000 life insurance policy or the highest auto liability coverage available in state.

For the record, it is recommended that you purchase as much coverage as you can reasonably afford. Budget for insurance prior to your mobile phone!

2. What are these FEES for? Many insurers add policy fees to the price of their actual “coverage” insurance premium. There’s nothing you can do about that. BUT, if you see an “agency” fee anywhere on your invoice…ask about it.

Odds are it’s the agent adding a few bucks to his or her commission. Policy fees are normal for insurance brokers, who don’t receive a commission from the insurer, or if using a “general agency.”

However, you’re everyday run of the mill standard auto and homeowners insurance shouldn’t earn the agent an additional fee. Agency fees are common with commercial insurance as well.

3. Are there any discounts available to me? Most standard market insurers are “discount crazy” nowadays. Make sure to at least ask your agent to double check your policy…especially at renewal, as insurers may have made more discounts available since you originally purchased your policy.

Tip: Discounts are great, but don’t get too carried away. If you are offered a lower premium with no discounts than another insurer who has given you discounts out the whazoo; take the lower premium.

The term “discount” has become has become such a buzzword in insurance advertising that many people actually argue about a lower premium that “doesn’t have enough discounts.”

4. Why is this policy better than the other? Assuming you went to an independent agent and got multiple insurance quotes, ask why your agent chose to present you with the quote you received? Is it coverage, price, ease of use, insurance claims handling or a combination of all of those.

If the agent doesn’t have a particular reason, he or she is just selling on price…which may work just fine for you. However, you may feel overcharged after a poor claims experience than you did when you bought the cheapest insurance available.

5. Insurance agents typically issue a policy, and then don’t think about it ever again unless you call or file a claim. They may not “shop” your policy for you every year. Be sure to call your agent if your policy premium increases at renewal. Your agent might just say, “yep, that looks too high, let’s have some other companies quote this for you.”

HINT: This only works if you have an independent agent who can switch insurers for you. If your agent only represents one insurer (captive agent), State Farm for example, they are not going to be able to shop your premium.

If the premium increases, you simply have to pay more for your insurance if you choose to stay with that company.

Read more: 10 ways to lower your car insurance premium.

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