Now that the New Year has begun many individuals and families have resolved to improve their finances. This includes reducing their debt, reducing monthly expenses, saving more money, or saving more for retirement. This plan almost always leads people to shop their insurance policies. I do not encourage this decision 100% of the time. Below are reasons not to shop your policies.
- Before you shop your policies you should look to save premium on the policy you already have. The insurance company you are with will have a different opinion of you then the company you are looking to switch to. A new company has stricter guidelines for new customers than for existing policyholders. If you have driving history or are a bad pay history you may not qualify for the new company.
- If you do qualify for the new company you may pay more premium. All reports the insurance company uses will be run for a quote. This includes credit history if your state allows credit history as a rating factor. Also Motor Vehicle Records (MVR) for tickets, citations, violations, and license status. A Comprehensive Loss Underwriting Exchange (CLUE) report will also be run to disclose accidents, driver and vehicles in the household, and claim payments made by prior insurance companies. If your credit history has declined you may not be eligible for the best priced tier. Based on your overall driving history you will be tiered with the new company. Your current insurance company may not have a violation or accident rated due to failing to verify reports or possibly violation/accident forgiveness.
- You may be receiving a longevity credit with the current insurance which you will not get automatically with a new company. Also if you have little to no tenure with your prior insurance company you may lose out on valuable credits on the new policy.
- You may lose a violation or accident forgiveness benefit if you switch your insurance company. For some companies you need to be with them 3, 5, or even 6 years to gain this benefit and you may be giving it up if you have a major accident after switching insurance companies.
- Not all insurance policies are created equal. Each policy and insurance company has a different insurance contract. When you switch insurance companies you may be losing valuable insurance coverage or policy language. Although limits and deductibles may be identical on the policy declaration page it does not mean all the same benefits and features are in the new policy.
If you must shop your policy you should not shop your policy more than every 3 to 5 years. Insurance companies make major changes to their insurance products and pricing in this range. When you do receive a quote make sure you complete a through comparison of your policy against the quote.
Always use an insurance professional for this process. Insurance professionals know the policies they sell better than anyone else. They also will know if the product you are looking to switch to will provide you similar coverage as your current program and the tricks to getting your best price. An insurance professional can also help you review your current policies to save money so as to avoid losing valuable coverages and benefits by shopping your policies.