I was an Insurance Agent for over 20 years before retiring, and I am going to teach you how to win at the game of insurance. You CAN beat the insurance company at their game!

First let me tell you the biggest mistake most insurance consumers make. They look for the best deal they can find (and this is good), but when their policy arrives they throw it in a draw and forget about it until they need to file a claim. And I have to tell you insurance companies love it. Why? Because as along as you forget about it they will be making more money than they need to, even if you are happy that you found a cheaper price.

There is a better way. A way to have better coverage for even less cost. Interested? Keep reading. You can win!

The name of the game is not only having an insurance policy; it is managing your risks with the policy you have. If you will take the time to learn how to manage your risks, you can have better coverage at claim time without paying more in premiums and without seeing your money flying out of your pockets to cover the cost of your high deductibles.

Managing Homeowners Risk

Let me show you how to do this with an example. Let’s assume the replacement cost of a home is $396,000, and that we have it insured for that amount. Using the rates for the state of Texas where I live, the premium for this policy is $1,825 per year. The deductibles chosen were 1%, or in this case $3,960 (most chose 1% now because it keeps the premium down, but this is painful at claim time). Further, let’s assume that we live in a hurricane prone area and hurricane season is just around the corner.

How can we get better coverage for less cost, or better, for no additional cost? Is it possible? Yes!

Here’s the game plan. On June 1st we call our insurance agent and instruct him/her to lower our windstorm deductible from 1% down to $500 or even $100 if it is available. He/she informs us that the cost will be a $600 increase in annual premium. Don’t worry about it because we know something the agent doesn’t. We don’t want it for one whole year. We just need it for the next four months. Why? Because the hurricane season will be over then and on September 30th we will be calling back to adjust the deductible up again. And when we do the premium will go down $400 if we go back to our 1% deductible (but we will not and I’ll show you why in a minute), but if we do our pro-rated bill will be only $200. In just a minute we will eliminate this $200 also. Stay with me, and I’ll explain later.

For now let’s ask ourselves what are the two things that can happen during the upcoming hurricane season? We will either have damage or no damage. Of course we would prefer the latter; but if the former is the case, guess what? We are better covered with our $500 or $100 deductible. Let’s see how much better.

Let’s assume we had roof damage to the tune of $15,000. Without risk management our settlement would have been $15,000 minus our 1% deductible of $3,960 or $11,040. However, by managing our risks our settlement is $15,000 minus either $500 or $100 whichever deductible we could get so that we will get either $14,500, or $14,900. And this means that we will have an extra $3,860 dollars for our vacation! (See? - $14,900 minus $11,040 is $3,860 dollars)---but what about our poor roofer? Well he’ll just have to get his vacation money elsewhere.

Now let’s deal with scenario number two. We did not experience any hurricane problems this year yet we have paid $600 to lower our deductible. Are we stuck with this increased cost? Absolutely not! It’s September 30th, hurricane season is over and we’ve called our agent to raise our wind-related deductibles. Now let’s NOT raise them back to 1% because this would generate only a $400 credit leaving us with that $200 pro-rated bill I mentioned earlier. Let’s raise them as high as we can go (as much as five percent if possible). Why? Because the risk of wind-related damages are over for at least the next nine months so why pay for even the 1% deductible? The agent re-calculates our premium and informs us that we NOW have a $600 credit. This eliminates the $600 charge we incurred by lowering our deductibles before the storm season began back on June 1st. And, thus we have managed our risks and obtained better coverage at no additional cost ultimately. Now you are a winner in the home insurance game.

Two words of caution are needed. Number one: don’t forget to call your agent back every June 1st to lower your deductibles back to $500 or $100 in anticipation of the upcoming storm season or you will be stuck with a 5% deductible ($19,800) next hurricane season. Number two: do not wait until a hurricane is too close to striking your area because agents lose their binding authority when a storm crosses certain latitudes and longitudes and this means they cannot change or sell any policies. So do it on June 1st as a matter of priority.

Managing Auto Risks

To manage our auto risks, one simply has to be aware of the fact that driving away from home in unfamiliar territory is more dangerous. And therefore when we are going on a trip it is time to think: RISK MANAGEMENT! How can we manage our risks to have better coverage for less cost, or even no cost?

Again, we will use Texas rates on our assumption. Let’s assume that we have two autos insured at state minimum limits of 20/40/15 for our liability and uninsured motorist coverage, $2,500 personal injury protection coverage, and $500 deductible on collision and theft. The cost for our six-month policy is $516. Next week we are going to go on a fourteen-day vacation. As good risk managers, we call our agent and tell him/her to increase our coverage’s as follows: liability and uninsured motorists to 100/300/50, personal injury protection to $10,000, and to lower our deductibles to $100. Again, there is no need to discuss why we are doing this, just ask them to do it). They will tell us that our premium increase will be an additional $220 per six months. Don’t be alarmed by this amount, remember we know that we will only need this higher coverage for fourteen days, because when we return from vacation we will be calling back to re-adjust our coverage’s back to where they were before or trip. Therefore, dividing the $220 by six months (180 days) we find that the cost will be about $1.23 per day, time’s fourteen days, for a total of about $17.