I received a call recently from an insurance consultant in Wisconsin whose client was moving to Florida and needed homeowners insurance on a new home he was buying. “We’ve already received a quote but there were some serious….issues.”
Apparently his client was working with a loan officer that had recommended an insurance agent who had prepared a quote and sent it over to review. To the banker and the client, there didn’t appear to be any serious issues. The coverage limit on the home was adequate for the loan and the premium was very low. The bank was satisfied with the coverage and the carrier was even rated “A” by Demotech. So what could be wrong with THAT?
What the banker, the client, and apparently the other agent didn’t know is that the insurance consultant understood very well what the policy was deficient in. To someone without an insurance license this would be very hard to understand. On this particular quote the agent had greatly decreased the contents coverage, the other structures coverage, the liability, left serious policy exclusions, grossly undervalued the cost of replacement, and didn’t recommend any coverage enhancements that, while inexpensive, would help better protect his client.
I am not picking on bankers or loan officers because I used to be one. I understand that they are trying to do right by their client by finding the most competitive offer for their homeowners insurance. But without truly understanding the complexities of the document they are promoting they will more than likely be doing their clients a great disservice by endorsing one proposal over another strictly on the basis of price.
So how do you know if you have been given a poor quote from an agent willing to gut essential coverages from the policy in order to make the premium less to win the businness? I would not recommend trying to do so by yourself. Fortunately most reputable insurance agents will review your current coverage or proposals free of charge and produce their own to compare. Simply ask, “What would be adequate coverage for me?” and the conversation toward a more complete policy will begin.
If you took the recommendation of your bank or loan officer and want a second opinion click here to get started.