THE PROMISE: It’s possible to save “up to 70 percent” on your homeowners insurance premium.
THE REALITY: This “too good to be true” claim is likely just that…too good to be true! Internet companies making such statements are probably eliminating coverage, misapplying discounts, or both. If you want to reduce your premium or coverage, call a local, duly-licensed insurance agent who represents more than one company who can offer options that might save you money without the loss of valuable coverage.
THE PROMISE: If you don’t have any outbuildings (sheds or separate garages, etc.) on your property, you are being “overcharged” and can realize substantial savings by eliminating this coverage.
THE REALITY: You can save a little premium if you can eliminate this coverage, but…the premium for sheds or separate structures is extremely low and has value even if you don’t have any outbuildings. Just like an auto policy covers a more expensive car that you might purchase during the policy term, many homeowners policies cover you for separate structures you might buy or build during the policy term, usually limited to a percentage (typically 10 percent) of the coverage on your main dwelling. The price for this “just in case” coverage is approved by the Office of Insurance Regulation(OIR) and is not an “overcharge” as it reflects the fact that there is only a possibility you “might” acquire a shed or outbuilding during the policy term. Eliminating it is your option, but it saves you very little and could be coverage you wish you had.
THE PROMISE: There’s no harm in “saving” money with a 10 percent hurricane deductible.
THE REALITY: A 10 percent deductible will “reduce” your premium, but…remember it isn’t 10 percent of the claim, it’s 10 percent of your building amount. EXAMPLE: If the replacement value of your home is, say $200,000 and you file a hurricane claim for up to $20,000; YOU GET NOTHING! This is why many lenders prohibit hurricane deductibles higher than two percent of your dwelling coverage.
THE PROMISE: Since the chance of a “total loss” is unlikely, you don’t need to buy full “replacement value” coverage.
THE REALITY: To the extent that you carry less than the required amount of “replacement coverage” on your home, most insurance companies will reduce your claim. Here’s an example; say you only purchased $50,000 total coverage on your $100,000 home from an Internet company. Then, you file a claim for $25,000. It’s likely the Internet company, or any company, will only pay half of the $25,000 needed to rebuild or the Actual Cash Value (subtracting depreciation), whichever is "GREATER!"
THE PROMISE: If an Internet company recommends discounts I don’t deserve, there’s really no penalty to me…I just pay a lower premium.
THE REALITY: The Unfair Trade Practices Statute prohibits this type of “bait and switch” scheme and misapplying discounts is against the law—the company can suffer steep penalties, including fines and possible revocation of its Certificate of Authority. Worse, if it was done with your knowledge and consent, you also could be guilty of insurance fraud. Finally, you could also wind up paying the difference or be cancelled for non-payment in the middle of a policy term, even during hurricane season when finding another policy is extremely difficult. Besides, if a company would price policies under false pretenses, the question you must ask yourself is “…What will it do when I file a claim?”
THE PROMISE: It is okay to cancel your existing policy anytime!
THE REALITY: Many companies charge so called “short rate” penalties for midterm cancellations by policyholders; even Citizens, the state insurer, will do this if you cancel before your policy expires. NEVER, cancel your existing policy without first discussing it with your licensed insurance agent.
THE PROMISE: Internet companies don’t use agents.
THE REALITY: Be careful of any company that says it doesn’t use agents. Florida law requires “every” company, even those with telephone personnel that sell and service, to use licensed individuals. ALWAYS ask if the person you are speaking with about purchasing a policy, the coverage, or the cost is licensed. NEVER buy insurance from someone who isn’t licensed or says they don’t need to be!! Instead…get their full name and report illegal activities to The Department of Financial Services at 877-MY-FL-CFO.
THE PROMISE: Internet home insurers have no hidden fees.
THE REALITY: According to filings with the OIR, the same online insurer spending 15.5 percent on advertising (part of which accuses others of charging “hidden fees”), also spends another 15 percent of your premium to process your policy for a total of more than 30 percent. This money, plus another $25 fee, is paid to what is called a Managing General Agency or MGA, which in this case, according to OIR filings, is wholly-owned by the online insurer.
Agents for traditional carriers can provide information on the various fees and assessments on your policies including MGA fees of the carriers they represent. When dealing with an online insurance company, the important thing is that you ask the right questions up front to fully understand exactly how your premium dollar is being allocated.
THE PROMISE: Companies that don’t use “local” agents have cheaper policies.
THE REALITY: NOT TRUE—based on premium comparisons and regulatory filings. Without agents, a discount Internet company spends your premium dollars on expensive advertising like full-page ads that can cost over 15 percent of your premium. Their premiums also reflect costs from direct mail, computerized Internet systems, phone operators, and more. Most homeowners insurance companies believe it’s more efficient to pay a local independent agent, only after they make a sale, than to pay upfront for the type of costly mass-marketing an Internet company must do.