Whenever you buy any product or subscribe for any services, you do it with the intention of getting value for your money and it really sucks when you cannot get your claims paid after spending years paying premiums. The best way to prevent this is to perform a due diligence before entering into an insurance contract.
You have to do a careful analysis of the company and its products before you commit yourself to it. Some of the due diligence checks that you can do before signing an insurance policy agreement include-:
13 Due Diligence Checks to Do Before Signing an Insurance Policy Agreement
1. License and certification-: First, you have to be certain that you are not dealing with a mushroom insurance company. You must investigate to determine that the insurance company is duly registered and license to do business and also licensed to sell the type of insurance product that it is offering you.
It doesn’t just stop at checking the insurance companies licensing information alone, if you are buying through a broker or an agent, you should also look into the licensing and certifications of the agent to be certain that you are dealing with the right set of people.
2. Pay back rates-: Another thing to include in your due diligence checklist is the pay back rates of the insurance company. It is important to find out if the insurance company has a terrible reputation for not paying claims. Luckily, you can find information and reviews about most insurance companies on the internet.
You can make use of search engines or visit business forums or insurance consumer forums, you would find a lot of honest and unbiased review about the company on there. You can also ask the agent or company for contact of existing and past clients that you may be able to talk to for more information.
3. Customer service-: A good insurance company should always be there for its customers and provide excellent customer service at all times. The deal insurance company must always be willing to help out, be courteous, polite, helpful and friendly. Before you buy any policy, ensure that you call the company’s customer service line to see the rate at which they respond to questions and enquiries and how they treat their clients; if they treat you badly before you buy the policy, they would treat you way worse when you want to file claims.
4. Financial strength of the company-: Never ignore the financial strength of an insurance company. Why? Because insurance is a long term relationship and when the company goes down, you lose your insurance contribution. Therefore, you must pay attention to the financial strength and solvency of the business to be sure that they would remain in business for a very long time. A copy of the company’s audited financial statement in the last three years would reveal details about its financial strength to you.
5. Exclusions and Clauses-: A lot of things are hidden in the insurance policy document that a novice may miss out if not carefully studied. You must study the company’s policies to find out the extent of coverage it offers and also, to reveal any exclusions and clauses that may be used against you when you file your claims.
6. Recommended Technicians-: When an accident occurs, you would need to get repairs done especially for automobile insurance. Insurance companies usually have a list of approved technicians that it works with, so you must find out who they are and how you can reach them. This is to avoid going to unapproved service providers when you suffer loses or accidents.
7. Emergency help-: Good insurance companies always have emergency response services operating 24 hours daily to provide emergency help and support to their clients. For instance, if you are involved in an accident, the insurance company may help you tow your vehicle, or provide emergency rescue services for you.
8. Compare rates-: When you are comparing rates, you are not necessarily looking for the cheapest policy in the market. You are looking for hidden fees and the extent of coverage an insurance product offers you compared to other competitors. Premium rates for one company’s policy may cheap but with limited amount of coverage, therefore, you have to take them to study and compare policies and prices before making decisions.
9. Look out for discounts-: Some insurance companies offer special discounts that may help to significantly reduce your premiums. Ensure that you find out if your insurance company offers such discounts and take advantage of them. Also, you should never be afraid to negotiate premium rates if you are not satisfied with what you are being offered.
10. Ask for Recommendations from friends-: You should also consider asking for recommendations from people you know. Your friends, family and associates would be able to give you unbiased reviews recommend insurance companies to you based on their own experiences.
11. Visit insurance investigation Bureaus-: It also pays to visit insurance investigation bureaus to learn and gather information about the insurance company before doing business with them.
12. Investigate causes of complaints-: I already mentioned that you should look out for reviews before buying insurance products. However, it may be impossible to find an insurance company with 100% positive reviews. Therefore, you should go a step further by investigating the causes of customer complaints and the nature of problems they had or are having with the insurance company. Some red flags are non-payment of claims, bad customer service and slow response.
13. You should also take out time to look into your insurance agent too. Sometimes, the fault may not be from the insurance company but from the agent. So, after you have finished conducting your due diligence on the insurance company, you should conduct one on the insurance agent or broker too. To make it easier, I have analyzed it into three steps:
- Investigate the insurance company and obtain honest reviews from previous and existing clients.
- Investigate the insurance policy for price comparisons, hidden fess, exclusions and clauses.
- Investigate the insurance agent/broker for competence, credibility and suitability.