November 2004
Exploring the Insurance Maze

   There are few financial issues that are more important than insurance because of what it means to forestall severe financial hardship if a sudden event such as a death, car accident, or natural disaster strikes your family. At the same time, you want to avoid buying costly and unnecessary insurance.

   Keep in mind three primary questions when searching for insurance. First, what types of insurance do you need—life insurance for your family’s financial security, protection from liability due to accidents, or to guard against property damage from accidents, robbery, fire, or storm? Second, how much insurance do you need to protect against the risks you have identified? Third, where can you go to get reliable insurance that is priced competitively?

   Where should you start? After you have determined what risks you want to cover, you can either shop for insurance through a trusted agent or on your own through the Internet. Agents can be valuable if they help you analyze your insurance needs. A good agent can help you through the maze or insurance contract language, particularly if you are looking at a complicated long-term care contract or property and casualty insurance. However, if you are limiting your insurance hunt to a fairly straightforward term life insurance contract and you are willing to educate yourself on the many choices, then you probably can move forward on your own. Remember, an agent working for a specific insurance company will push that company’s policies. Therefore, you should consider choosing an independent insurance agent because he or she can help you sort through the insurance possibilities.

   If you chose the Internet, www.Insure.com is a good source of comparative information and can get your insurance quotes. If you go to other sites, be careful not to give out your personal identifying information such as your name, address, telephone number, and social security number unless you are ready to contract with the company for insurance. After all, there are many legitimate sites that will give you quotes without asking for this information upfront.

   How can you check to see if the insurance company or agent is reputable? Insure.com is a good place to check for national complaint and lawsuit records for companies, and the Wisconsin Commissioner of Insurance (OCI) is a good place to check to see if it the state has taken action against the company or agent (http://oci.wi.gov/pub_list/pi-030.pdf). Just last year, OCI brought 158 serious actions against insurance companies for a total of just under $400,000 in penalties. OCI also denied 102 insurance agent licenses and revoked another 34 licenses for serious violations of state insurance laws.

   What types of insurance should you avoid? Generally speaking, the following types of insurance are not competitively priced and prey on your fears: mortgage life insurance (unless required by your lending institution), insurance on outstanding credit card balances, and flight insurance. The same type of coverage is built into basic life and disability policies and will cost you significantly less.

   Where can you go for more information? The Wisconsin Commissioner of Insurance publishes a helpful Consumer’s Guide to Insurance at: http://oci.wi.gov/pub_list/pi-051.pdf.