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Insider tips on buying the best insurance policy to fit your needs

  • Peter Whalen of Whalen Insurance in Northampton.<br/>KEVIN GUTTING
  • Peter Whalen of Whalen Insurance in Northampton.<br/>KEVIN GUTTING

One of the first insurance companies in America was founded by Benjamin Franklin in 1752. Despite the industry’s long reign in the U.S., many people still have basic questions about insurance. Who needs it? How much should a person have? What does all that fine print mean?

To be fair, insurance has gotten more complicated since Franklin’s Philadelphia Contributorship was offering seven-year policies to protect against fire damage. But the essence of insurance — to save individuals from financial ruin in the wake of a disaster — has remained the same.

To help people better understand the rules and regulations governing insurance and how to buy it, the Massachusetts Office of Consumer Affairs and Business Regulation offers about 20 consumer guides on various types of insurances, addressing everything from pets and boats to health and travel. These guides are available at the office’s website.

“We always try to encourage the consumer to be proactive rather than reactive when it comes to buying insurance,” said Barbara Anthony, undersecretary for the consumer affairs office. “You’ve got to protect your accumulated wealth.”

Even if that accumulated wealth only adds up to a closet full of clothes, a rocking chair, an old TV and heirloom jewelry, protecting yourself from the costs associated with natural disasters, fires or lawsuits is important.

“You might not think you have much,” said Peter Whalen, owner of Whalen Insurance Agency in Northampton, “but just imagine if you had to pay to replace everything.”

People can save big on insurance, Anthony notes, if they know what to ask. For instance: Did you know you can haggle on premiums?

What follows is a primer on how to buy insurance that best fits your needs.

Insurance 101

THE AGENT: One of the first steps to buying insurance is choosing a provider. There are two options, buying from an agent, like Whalen Insurance Agency, and buying directly from an insurance company, like Allstate or Progressive. An agent can represent multiple insurance companies, offering up many options and plans to customers, but buying direct, in some cases, may be cheaper, Anthony said. If you opt for variety and go with an agent, Anthony said it is important to find one that offers “full service,” as in they sell home, car, life and renters insurance from a multitude of companies.

Anthony said since the auto insurance industry was deregulated in Massachusetts and insurance providers now have to compete on price, agencies are working with more companies. “Now we do see agencies representing more and more companies than before we deregulated,” she said. “Now, we see them representing five or six companies at least.”

Also, when choosing an insurance agency, Anthony said you should make sure the office is organized to meet your needs: Check on things like hours, whether they’re open on weekends, how available agents are to answer questions quickly. To find agents in your area, visit www.mass.gov/doi and click on “Insurance awareness: Know what you have, learn what you need.” This will bring you to buying guides as well as a list of agents by geography.

COMPENSATION: When selecting a potential policy, one of the first decisions you have to make is whether to insure your property at actual cash value, which pays what your items are worth today or cost coverage, which pays to replace your belongings with property of a similar kind and quality. For example, if you decide to insure your belongings at actual cash value, a $300 TV you bought five years ago could be worth only $50 today and that’s what you’d get from the insurance company if it’s destroyed. With cost coverage, on that same 5-year-old TV, the insurance company would pay out enough money to buy a similar set — almost assuredly more than $50.

FINE PRINT: When reading a potential policy, it’s best to go in knowing you will be asking many questions — and don’t be afraid to do that.

Have an agent explain the policy to you and don’t forget to ask what the policy doesn’t cover, Anthony advised.

“You still do need to read the policy yourself. You shouldn’t be buying a policy if you don’t read it,” she said. “If I don’t understand everything I read, I’ll outline it and mark up the policy with a yellow marker and call the agency.”

BARGAINING: After you’ve decided on a policy, it’s time to get the best deal on the annual premium. Whalen said the best thing a consumer can do to get money knocked off premiums is to bundle your home and auto coverage.

“A lot of insurance companies, if not most, offer 20 percent or more as a discount on your home if you’ve got cars with the same company. It’s a significant savings,” he said.

You can also bargain on price with an agent, Anthony said. “A lot of people don’t know that,” she added.

People who have the most leverage to bargain are those who have had the same company insuring their home and cars for years without making any significant claims.

“Talk to the agent or the company representative and see if you can’t shave off a few dollars off your premium,” she said. “This is particularly effective if you can find another policy that is cheaper elsewhere. Rather than lose you as a customer, they may negotiate in terms of premium.”

DEDUCTIBLE: In setting a deductible, Whalen suggests that if money is tight, people can opt for a bigger deductible, which translates into a lower premium.

This means that what you pay annually for the policy will be less than if you had a small deductible, but you’ll end up paying more out of pocket in the event of filing a claim. This annual savings could allow someone on a budget to insure their property for more money.

“If someone says I can only spend this much, I often say get a higher deductible and get more coverage,” Whalen said.

REVIEW: Once you’ve bought a policy, it is important to review it every one to three years, said Anthony and Whalen. The market changes and the amount of money you’re insured for one year may not be enough to replace the value of your items five years later. For example, said Whalen, when it comes to home insurance, the cost of construction and labor is always rising and if you haven’t adjusted your coverage in years, your policy may have been large enough to cover your home and contents in 1999, but in 2013 you’d only have three-quarters of what you need to rebuild. Also, he said, keep your agent up to date on upgrades made to your home or expensive items purchased, to make sure new property is covered in case of disaster.

CLAIMS: Before filing a claim, Anthony suggests talking to your insurance provider and asking them how much filing a claim will make your premium rise; it may encourage you to pay for the damage out of pocket.

At the very least, she said, it’ll let you know what you’re in for.

“You can ask, don’t be afraid,” Anthony said.

SCAMS: Anthony said she doesn’t know of any insurance scams specific to Massachusetts, but noted that consumers should be wary of anyone purporting to be an insurance provider who wants money up front before providing services.

“That’s a big red flag,” she said.

Also, if you are contacted by email or telephone by a supposed insurance provider, go directly to the company’s website or call the company directly to check on the validity of the offer. Don’t rely on the contact information provided by the salesman in an email on the phone or by mail. Do your own research. To find out if a company is registered in Massachusetts, check with the division of insurance at www.mass.gov/ocabr/ and click on the licenses tab. Follow the links to a page of registered company lists.

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NORTHAMPTON — Here are things to keep in mind when shopping for different types of insurance: HOME: You should secure enough home insurance to cover your house, contents, exterior buildings (such as garages and sheds) and to provide some money for loss of use — cash that can cover expenses such as rent or hotel fees, food and transportation while … 0

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