Choosing an insurance agent: Experience is not expertise

In my last blog post, I wrote how you should choose an agent with enough experience to be competent. More than 2 years is enough, but 5 to 10 years experience is preferable. Anything more than 10 years is not relevant. But experience does not guarantee expertise.

True expertise is hard to find. I have always been surprised how little your average, experienced & successful agent knows about the products they sell, or how much bad information they can provide to their customers & prospective customers.

While getting an auto insurance quote one time, an agent was trying to impress me by telling me about his college degree in Finance. While we were discussing coverage, the agent told me about the benefits of Rental Reimbursement coverage, if I needed to rent a car.

To test the agent’s knowledge, I asked would Rental Reimbursement pay for a rental car, if my car was out of service due to mechanical breakdown. This is a reasonable question some customers ask, even though I knew it paid for a rental car for the period of time your car is out of service only when it’s due to a covered claim. Click here to read more about Rental Reimbursement.

The agent told me, “Yes, Rental Reimbursement coverage would pay for my rental car if my car has a mechanical break down.”

If I later tried to place a Rental Reimbursement claim, the agent would have to break the bad news to me when he found out it’s not covered. It wouldn’t be unusual for the agent to deny he ever said it was covered — not because he was deliberately lying, but because he probably doesn’t remember the conversation.

I think most agents wouldn’t make this mistake about Rental Reimbursement coverage, but its not uncommon for agents to make mistakes like this, which can cost their clients money, or at the very least, set the wrong expectations regarding coverage.

Great agents can make errors, too (even I have made blunders in my career), so this blog post will give you tips to protect yourself from making mistakes with your insurance based on bad information and advice, and how to avoid agents prone to give it to you.

Let me give you another example to show you how dangerous bad insurance advice can be, so you will realize how important it is to be able to recognize it.

A customer called me wanting to reduce her auto insurance liability, because an insurance agent friend of hers told her she had too much insurance, since she is not a home owner.

Her insurance agent friend gave her horrible advice. It’s true most agents encourage clients whom are home owners to take more liability insurance, because they have more to lose. But this does not mean people with no or few assets should take less liability coverage.

Whether you own a home or not, if you are at fault for injury or property damage in a car accident, and your car insurance does not cover the full cost of the damages, you may have to file bankruptcy to avoid having to pay the uncovered amount, or have the uncovered amount garnished from your wages. You can read more here about the importance of auto insurance liability.

Everyone has too much insurance if they never have a claim. However, even a minor car accident can leave you without enough coverage if you take the minimum coverage required or low liability limits. Reducing this customers coverage saved her about $30 every 6 months. But not having enough coverage when you need it, can cost you a lot more.

Unfortunately, success in the auto, home, and life insurance business does not require true expertise, and there are successful windbag agents with many years of experience giving poor advice or wrong information. How can customers and potential customers know when to question an agent’s advice? In addition to the tips I provide below, here’s a link to a post on the Academy Journal Blog (Are You an Insurance ‘Expert?’) I read today that sums up some of the qualities you see in good agents and bad agents trying to sell you on their expertise. It’s enough of a problem to be a subject of a post on a insurance blog, and I’ve had the displeasure of knowing agents showing many of the characteristics warned about in the post.

Now, don’t be alarmed, because there are competent, diligent agents doing their best to give good advice and avoid mistakes. With most types of non-business (personal lines) property & liability insurance, like auto insurance, home insurance, motorcycle insurance, etc., you don’t need an agent with a high degree of expertise.

Here is what you should do:

1. Have several competing agents review your insurance coverage each year and ask about coverage recommendations.

This is easy to do when you shop your insurance each year as I recommend. You may have no intentions of changing your insurance to another company, but by shopping each year, you can get other opinions on your insurance to know if you received bad information, make sure you don’t have gaps, as well as making sure you are not paying too much.

Here is an example of how it can help you:

Say you are insuring with the agent who told me Rental Reimbursement pays for your rental car if your car broke down. He told you the same when he reviewed your auto insurance policy. You call competing companies, have them give you a quote, and a review of your coverage. I’m sure several agents will tell you Rental Reimbursement applies only when your car is disabled due to a covered claim.

By speaking with several agents, no matter what type of insurance you need to buy, you will notice some agents will have better insurance options for you, or more knowledge about what you need.

For example, almost any property & liability insurance agent will sell you condo insurance. But some insurance companies do not have optional coverages important to condo owners, such as higher dollar limits for Loss Assessment coverage, or you will find some of the agents with whom you speak, are less familiar with the insurance needs of condo owners as other agents.

2. If it is a question of coverage, have your agent show you the wording in the policy explaining the coverage.

Say you call your agent back after other agents have explained to you how Rental Reimbursement really works. Your agent tells you, “Yes, that’s how it works with most companies, but your policy includes coverage for mechanical breakdown.”

Make sure your agent provides you with a copy of your policy, and shows you where it says in writing you are covered for mechanical breakdown. If it is not clear to you that you would be covered for mechanical breakdown, have other agents read it and see what they think.

Your insurance is too important for you to rely on the opinion of only one agent. Use the competition among insurance companies to your advantage by getting the input of many agents.

3. Educate yourself.

You don’t have to become an expert about insurance, but learning about what type of insurance you need and how it works, can help you avoid buying insurance you don’t need, and avoid the unpleasant surprise of not having the coverage you do need if you have claim.

You can educate yourself by reading my blog and using my website, as well as other resources on the Web. My information can save you a lot of money, even if you never have a claim. Bookmark my site or place it in your favorites. I’m here to try to help you, so feel free to e-mail me with your insurance questions.

Many people pay too much for their insurance because they never shop for better rates, or if they do shop, they don’t check the rates of enough companies. For a lot of people, the best auto & home insurance companies are the ones with the coverage they need at a lower price. With auto & home insurance, you don’t get better service or coverage because you pay more. Some of the best companies have competitive rates. Some companies charge twice as much as others for the same coverage. But no single company has low rates for everyone. You have to shop with all the leading companies, to find the company with the best coverage and best price for you. The ad below will take you to links to get online quotes from leading Home, Auto, Health, & Life insurance companies in your area. Choose the type of insurance, put in your zip, and start shopping now!

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