Guiding your life’s biggest financial moments

Personal Finance

How Much Insurance Should You Get? Advice from a lawyer

Kiplinger logo

Thomas, a Chicago reader, wrote: “The Liberty Mutual Insurance TV commercials that say ‘Pay only for what you need’ seem to suggest that other insurance companies will sell you coverage you don’t need. do not need. I bet a lot of people are wondering what they mean.

This column received similar feedback, and to find out what “Pay Only For What You Need” means, I reached out to the company’s media relations team at Liberty Mutual, based in Boston, by asking them this question. It was a few weeks ago and I’m still waiting for a response. So I turned to a litigator whose legal practice focuses on bad faith on the part of insurance companies and asked him what he thought about it. The discussion that followed surprised me.

“When they say you’ll only pay for what you need, they’re implying that other insurance companies will automatically sell you coverage you don’t need, which is complete nonsense.” , said Los Angeles-based lawyer Shant Karnikian.

In fact, the opposite can tend to be true for some insurance companies, he says. They may prefer that customers buy less insurance coverage, not more. And that can be a problem for consumers.

“The insurance industry wants to minimize exposure to future customer losses, and plaintiff lawyers are already seeing this reflected in the marketing practices of companies, where they only want to sell minimum limits for auto or home insurance. , thus reducing payments in the event of a claim. . If you buy more coverage, they are liable to pay more for the loss.

“Even if you need it, they don’t want to sell it! But if you ask for more coverage, they have to sell it to you. This means that consumers need to be educated and learn the covers they absolutely must have.

“Auto and property insurance companies allow you to accept or decline various types of coverage,” says Karnikian, “and today in particular, the public should know that, with few exceptions, insurance agents insurance companies are not required to advise their customers as to what to buy.

That’s right. Insurance agents are generally not required to tell you what coverage is available or what you probably need. “In most cases, insurance agents are just order takers, and unless you tell them what you want, they are generally not required to advise you to get certain types of coverage,” he observes.

For those looking for insurance, Karnikian gives these recommendations:

  1. Car insurance: Never buy only the minimum amounts required by your state, which vary and can be as low as $ 10,000 per person or $ 20,000 per accident. Buy liability limits of 50/100 000 or more, which means $ 50,000 per person or $ 100,000 per accident. And always purchase medical expense coverage and uninsured / underinsured coverage with limits of at least $ 100,000.
  2. Home / Commercial Property Insurance: Overestimate the cost of rebuilding your home or office, and include coverage to bring the property up to date with building codes. In the event of a major disaster, such as a forest fire, the costs of materials and labor will be much higher than in normal times. Inadequate coverage means you will have to pay the price difference out of pocket.
  3. Ask in writing: “What is the maximum coverage I can get for my home, car, liability, and business?” The difference in the cost of premiums between the basic policy and a much larger policy will not shock the public. It is totally worth it.
  4. Consider a broker instead of an agent: Brokers are not limited to selling policies from a single firm. They work for you. Agents are limited to only selling policies for the company they work for, which may not have the best policy for your needs.

Karnikian concluded our discussion with this advice: “Imagine the cost of your worst case scenario and buy insurance within limits high enough to cover it. “

You may also like...

Leave a Reply