We all need insurance, and will continue to need insurance if we want to protect our assets. But why is it so expensive?
Several factors contribute to rising insurance costs. Among them are fraud, Assignment of Benefits, and under-insuring the home. Unfortunately, fraud will always be a battle that costs all of us a great deal of money. However, there are a few ways to help prevent those two drivers of high insurance rates, that you may not be aware of.
Let’s examine them more closely.
Assignment of Benefits (Fraud)
Assignment of Benefits (often referred to as AOB) is causing a major industry issue. If this form of fraud continues to be abused, insurance rates will continue to rise.
Here’s what you should know – If a contractor ever asks you to sign a form saying they will handle your insurance claim, say “NO!” You are most-likely signing an Assignment of Benefits form, which means you are literally assigning the benefits of your insurance policy to the contractor. What they do next is submit a claim to the insurance carrier for that particular damage that is thousands of dollars more than the true damage, and collect the claim payment. Unbeknownst to you, they just got paid nearly double what they quoted you, and you now have that inflated claim history on your record.
Another unfortunate situation which occurs is a contractor will have you sign the AOB form and they will begin their work. Then the contractor submits the form and claim to the carrier, and the carrier recognizes them as a repeat offender, or that the cost of the repair is way above the norm. The insurance carrier rejects the claim. Now the contractor isn’t getting paid, so they immediately stop working and you are stuck with no money, and an unfinished repair to your floor or roof. These inflated claims are causing the carriers to payout more money than necessary, causing them to then raise their rates, making you pay more.
The “buy as cheap as you can” mentality is driving homeowners to buy insurance directly from a carrier online or over the phone. Often times, when buying these cheap rates, you are often buying less coverage. Think about it, it’s like anything else you spend money on, you get what you pay for. What do you think happens if you, under-insured homeowner, submits a claim, and gets rejected? Or you get paid a smaller-than-expected sub-limit? You would probably get mad and sue the carrier. Now the carriers are spending money on the original claim, the adjusting, and the litigation. Suddenly the carrier is unprofitable and has to raise their rates to compensate for this litigious society. This makes going to an independent insurance agent even more important. Don’t go straight to the company via online or over the phone, or this could happen to you.
As a homeowner, it is important to educate yourself on your insurance policy, your personal exposure, and have a representative like an independent agent to help you navigate this complex subject. Trying to save an extra dollar on your premium is not the way to lower premiums. Also, committing fraud through signing an assignment of benefits isn’t only often illegal, but it affects you and your community long-term. Don’t rob yourself of affordable rates, and if you have a conscience then don’t rob your neighbors as well.
If you are in need of a trusted advisor, call one of our agents today! To help you find the perfect one for you, use Bankers Insurance Group’s “Find an Agent” tool at www.bankersinsurance.com.