Think Before You Click
A look at the dangers of buying insurance online.
We’re living in an age of do-it-yourself. Thanks to the internet, instead of hiring a travel agent or a tax preparer, you can book your own trip and file your own tax returns with the click of a mouse. You can also insure your car, your home, or even your life — all online. But buying insurance for your most important investments is more complicated than buying an all-inclusive vacation and purchasing insurance policies online can come with a lot of risk.
Eric Vocke is the president of Capstone Insurance – an independent, Louisiana-based property and casualty agency. He’s also the president of the Professional Insurance Agents of Louisiana New Orleans chapter.
Vocke says it’s okay to get a renter’s insurance policy online because there aren’t many variables at play.
“A renter’s policy is pretty straight-forward,” Vocke says. “You have contents — your personal belongings — personal liability, and loss of use in case you have to evacuate, or your apartment is damaged.”
But, Vocke says, if you are looking at homeowner’s insurance, you should talk to an agent.
“We have a questionnaire that we always go through with people and not every question will pertain [to every client].”
On Vocke’s questionnaire are approximately 60 questions relating to variables dealing with things like occupancy, ownership, roofing type, plumbing, heat, air, electrical, siding and foundation — to name a few. All impact liability exposure.
And then there are things that are more regional concerns, like cracked driveways and sidewalks, as well as big oak trees, all of which are common in the New Orleans area, that could impact coverage and liability.
At Capstone Insurance, Vocke says he writes homeowners insurance policies with over 25 carriers. He notes that using an agent with access to multiple carriers gives the client more options.
“If somebody is trying to buy a policy online, they’re at the mercy of that one company and that one company’s guidelines and whether or not they’re asking you the right questions,” Vocke says. “If they’re not asking you [on the questionnaire] if a small portion of your roof is flat, and it is, and they don’t take flat roofs, you may have an issue.”
Life and long-term care insurance are other types of coverage where you might want to talk to a professional. Tina Dandry-Mayes is an insurance agent and financial advisor who deals with both life and long-term care insurance — which she says is not as simple as one might think.
“Life insurance is not concrete,” Dandry-Mayes says. “Nobody knows when they’re going to die, so you don’t know how many years of money to create for a client if they’re leaving behind a wife and kids.”
Life insurance policies can be set up to cover a certain length of time. Say you want a plan that will cover your mortgage for 10 years, or until your kids graduate from college if you were to die unexpectedly. But maybe you don’t need to continue that high level of coverage beyond 10 years when the mortgage is paid off and your kids are able to support themselves.
“Life insurance and long-term care are two very personally designed plans,” says Dandry-Mayes, who adds that conversations about purpose, budget and timeline of coverage likely don’t happen when you sit down to buy insurance online.
An agent can also help adjust your plan when your needs change, for instance, if someone is looking for a plan that can convert to a permanent policy, they need a policy that offers conversion rights, “which means you can take that policy you wrote at a preferred rating and 10 years from now you can convert it to a permanent plan to last until you’re 100, without having to go back to underwriting,” Dandry-Mayes says. The benefit is that the rate stays the same, even if, for example, someone develops a health condition like diabetes.
Ryan Rodrigue, vice president of sales and administration at Hollis Companies — a Louisiana firm that specializes in employee benefits — says it’s a common misconception that you’ll pay more for insurance with an agent than with shopping online.
“A lot of times there’s no cost difference between buying direct or buying through an agent because that commission percentage is already built into the rate,” he says. “Insurance agents get a small percentage of the premium dollars; we don’t tack on an additional fee for doing our job. So why not have access to a local expert? You’re paying for it anyway.”
There’s also the issue of continuity of service.
“A policyholder becomes that agent’s ‘client,’ and now the client has a point of contract for service issues, questions and annual reviews to see if the contract still provides what the client needs,” says Dandry-Mayes.
“When buying insurance online or over the phone there is no assigned agent — just a 1-800 number and a robo answering service to try and get to the proper person to answer your questions.”
When it comes to buying insurance online, Dandry-Mayes adds, “Remember the old saying — ‘You get what you pay for’ —but you won’t get what you really need.”