Lower Price Insurance Can Still Offer High-Touch Service
When you bought that cheap TV on Craigslist and it stopped working a week later, your roommate may have said: You get what you pay for. It’s a classic adage that means if you want high value, you must pay a higher price.
While the saying holds true in some cases (cheap toilet paper, anyone?), it’s not a universal truth. In some cases, you truly can save money and still get a product or service that is just as good as the higher-priced alternative.
Here’s an example.
Think about cable TV. A decade ago, you had to pay for a cable or satellite package if you wanted to watch college football, NFL or other live sports, along with traditional network television. The monthly bills for those TV services ranged from about $85 for cable to more than $100 for satellite, according to Leichtman Research Group.
But today, with a wide variety of streaming services, you can watch all the sports, news, TV shows you want for a lot less. Streaming services like YouTube TV and Sling provide viewers with live TV channels for $20 to $40 per month. And the trend is catching on: More than 500,000 households cut cable or satellite just during the fourth quarter of 2017, according to Fortune.
Those people are getting the exact same TV shows and football games as the cable subscribers; they’re just paying a lot less.
You know where this is going, right?
The same reasoning holds true with insurance. Basically, an insurance policy is a guarantee that you will be compensated for losses, up to a certain limit. For instance, if you have collision insurance for up to $20,000 and your car is totaled in an accident, you’ll be compensated up to $20,000, whether your monthly premiums are $70 or $200.
It’s a mistake to assume that paying a lower premium will result in a less desirable claims experience. Every insurance company sets rates using its own unique formula. And those rates aren’t usually good indicators of the company’s service levels.
For example, if one company with large numbers of policyholders in the Northeast experienced high claim levels due to a recent hurricane on the East Coast, its rates will likely rise for policyholders across the country. Those higher rates don’t mean the company will provide better service; they mean the company is trying to recoup its losses.
Can you be sure the cheaper policy still offers value?
If you’re considering switching to a cheaper insurance provider, it’s understandable to want to make sure the provider will offer a satisfactory claims experience. But positive claims experiences come with rates at a variety of price points.
For example, in a recent J.D. Power ranking, the five car insurers with the most highly ranked claims experiences offer widely divergent rates. And you may have never heard of some of the companies with the highest rankings: Amica Mutual, Auto-Owners, Erie Insurance, The Hartford and The Hanover took the top five places.
Just because you’re using the insurance company you’ve always used or the one that is a household name doesn’t mean you’re getting the best service—or the best price. Click here to see if you can save money on your insurance.
If you’ve saved money on insurance and had a smooth claims experience with the new company, we’d love to tell your story. Please contact us to share.
Editorial content on Gabi.com is not written by a licensed insurance agent. It is intended for informational purposes only and should not be considered legal or financial advice.