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Insurance Costs Rise, But Don’t Cut Coverage



By Lucy Carmel, THELAW.TV

If your insurance bills are eating up more of your income, you’re not alone. Policyholders are starting to feel the effects of insurance inflation.

“Every carrier I deal with in one way, shape or form has decided to raise rates,” says Bill Van Jura, owner of N.Y.-based insurance agency Birchyard, LLC. “Overall, rates are going up.”

According to Bankrate.com, 37 percent of U.S. consumers say they saw their overall insurance spending increase in 2012, mostly due to rising premiums for all kinds of insurance, including homeowners, renters, auto, life and health.

The Bankrate study also found that 52 percent of consumers spent about the same on insurance products, and just 7 percent saw their insurance bill decrease.

You can’t afford not to have insurance protection, but it’s tough when you also struggle to afford the premiums. Scrimping coverage areas to whittle down insurance bills is a penny-wise and pound-foolish move, as it can leave you more exposed to liability and financial hardship.

“Insurance companies have us by the neck.” Matthew L. Sharp, P.A. and principal of the insurance law office bearing his name in Reno, Nev. “But I don’t think people should be cutting coverage.”

The best way to recoup insurance costs while maintaining coverage is to look at your deductibles. “If they’re anything less than $500, you’re crazy,” says Van Jura.

Van Jura explains that this is a common deductible amount, and a policy with a lower-than-$500 deductible would cost significantly more. Some policyholders with built-up savings accounts are comfortable with higher up-front, out-of-pocket costs in the event of a claim, so they opt for even higher deductibles to slash premiums.

While insurance rates en masse appear to be rising, Van Jura says that it doesn’t necessarily mean individual rates are going up. For now, carriers may not be passing on higher prices to their current customers, but new customers would come in at current, higher rate levels. Customers who aren’t seeing rate increases immediately will eventually and inevitably have to pay more.

Beefing up auto and home coverage

There is one little-known way to save on car insurance, and that’s by buying more of it.

It seems counterintuitive that higher coverage levels translate to lower premium costs, but carriers quote customers in part on perceived responsibility.

“If you have minimum car coverage of $25,000 per person, $50,000 per occurrence and come to me for a quote, your rate will be higher than had you come to me with $100,000 per person, $300,000 per occurrence,” says Van Jura on car insurance coverage limits.

This is why carriers ask for current insurance information on applications, and the policy you have now can affect your future premiums. This is especially true of nonprime insurance customers.

“College-educated homeowners with good credit are ideal,” says Van Jura. For slightly less-than-ideal customers with blemishes on their credit, for example, the demonstrated responsibility of robust auto insurance could give them a boost toward lower premiums that prime customers enjoy.

Homeowners also need to check their insurance policies to make sure they have adequate coverage.

“The unfortunate thing I’ve seen in homeowners is most people are underinsured,” says Sharp. “That’s because the system has been created in away to rig the consumer.”

Sharp says that homeowners insurance companies use algorithms to access a home’s value, and the home replacement value they generate is typically below the actual market value. In the event a policyholder would need to file a claim, the check from the insurer would fall short on the actual costs to replace their home.

Homeowners should know what their home’s replacement value is, ideally through independent, third-party estimates, and make sure their policy is consistent with that.

What to do if your rates go up

If your insurance rates are rising, there are a few things you can do.

First, go through your policy and make sure the information is correct. If you changed jobs and your daily commute, for example, that could impact your car insurance rates.

Van Jura recommends giving your current carrier the first crack at offering a better rate. Check for all eligible discounts and examine your deductible.

Once you know your insurance policy and price from your current company, you’re ready to shop around. Van Jura recommends getting at least three other estimates. “Some companies are more competitive than others,” says Sharp.

Running through these simple steps is a win-win.

“It’s always a great outcome,” says Van Jura. “You either find out your rate is really competitive, or you find out you can make some improvements.”

And in the event your insurer wrongfully denies a claim, contact an attorney who specializes in insurance bad faith.

“That happens more than it should,” says Sharp. “Wrongful claim denials happen in all lines in insurance.”

You could be eligible to receive not only for the money you’re entitled to through your policy, but also compensation for emotional or financial distress.

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