Why you insure at replacement cost not purchase price

So many people like to buy investment properties some even expand and develop a full portfolio.  One thing they have in common is not paying full price.  Now the investor buys this property to see two things occur; The property appreciate and the monthly cash flow it should bring.

So many times when you are not buying a traditional home insurance policy you have a little more flexibility with the replacement value of the home.  One key to remember is you need to rebuild a structure that you can rent for the same money you were receiving before it was damaged/destroyed.  You do not need to build the same exact home remember this is a money making venture.  Let’s rebuild a structure that can earn money.

Who are you buying from?

So when buying insurance you can buy from;

Direct; You call directly to the insurance company, just about every company has this option available.

Agent; Similar to buying direct you are calling directly to a company but speaking with an agent of the company.  Think State Farm, Allstate, Nationwide, Liberty Mutual, etc.  Definitely a step up and many times this produces a positive result.  On the plus side you SHOULD be getting a human being that  has a vested interest in your policies, happiness and rate.  On the negative, more times than not they only have one company available.  So if rates go up aw well, if you need an insurance they do not offer aw well.  There is also the inherent problem that you have an agent trying to earn a living.

So your rate went up, now what

Don’t panic, somewhere a rate has gone down we just need to find it.  So here are some steps;

  1. Call you current carrier and make sure everything is accurate.  Like it or not unchecked rates go up, let’s just make sure no mistakes occurred.
  2. So we know your policy is correct, now make sure you are getting all discounts you can
  3. Now we check on your annual mileage***typically 8000 or less per year gets a savings
  4. Have you done a driving or other applicable safety course your state allows?

So you want a lower rate…

  • Improve your credit score…huge factor can make a bad driving record irrelevant
  • get a college degree…it helps but not everyone
  • own a home/condo..helps a lot and gets a multi-policy savings
  • take a defensive driving course..boring but profitable
  • make a point to review ANNUALLY
  • Know the value of your car…Do you still need physical damage coverage?
  • Be loyal to a good agent not a company….nuff said
  • take higher coverage…you’ll look better when shopping

Insurance has been commoditized set your coverage plan than your rate!!!

Do you really need a billboard if you are so good?

So I was driving down a pretty well trafficked road that I use pretty regularly.  The difference is that yesterday I noticed two large billboards for Geico.  Now this is a company whose rates, service, website, etc. are supposedly excellent.

Are you overpaying or being overcharged?

My guess is you are likely overpaying.  What’s the difference?  Overpaying can be thought of as allowing your policy, regardless of type, to renew year after year after year without checking in with your agent or company.  In that case most companies gradually allow an unchecked policy to go up in rate and likely not keep up with the needs of the owner.