Posted by Donald J. Medeiros Insurance Agency on October 17, 2011

Before you answer that, read the conversation below between a customer and his insurance agent and then tell us how you feel.

A customer, Mr. Smith walks into XYZ Agency with his insurance invoice in hand.

Mr. Smith: “I’m not happy! My insurance just increased another $50.00. It’s beginning to seem that every year my insurance bill just keeps on getting higher!”

The Agent: “I’m sorry Mr. Smith that you’re upset, what can I do to help?”

Mr. Smith: “I want you to save me money on this bill else I’ll go somewhere elsewhere that I know that I can get my insurance much cheaper!”

The Agent: “Well, the reason for the increase is because the replacement value of your home has gone up. The costs of materials have all increased, therefore, the valuation of the replacement has. So, the cost of insurance reflects that.”

Mr. Smith: Obviously not satisfied with the answer says, “All these insurance companies are just in the business to do one thing… To make money off of us folks that can’t afford all of this!”

The Agent: “Honestly, Mr. Smith, do you really feel that is what we are in the business to do?”

Mr. Smith: “Yes! The proof is right here!” waving his bill in the air, “and I’ve never had a claim!”

The Agent: “Ok, ok. Then tell me this and I’m way off the subject here. Supposed the city, in an attempt to save money this year, proposed cutting the police and fire departments’ budget by a third. How would you feel knowing that it would reduce their coverage of the city?”

Mr. Smith: “I wouldn’t be happy at all for they are here to protect and serve the city!” “Protect me!”

The Agent: “True, very true. Have you ever needed their assistance?”

Mr. Smith: “Well no, but someday I may. I don’t want the risk of possibility of not having someone respond when I do need it.”

The Agent: “But you would be very upset if they decide to reduce their coverage to protect you, even though you never needed them in the past, right?”

Mr. Smith: “Yes!”

The Agent: “Well, the police and fire department purpose is to protect you while the insurance companies are in the business to protect your livelihood. The big difference is that your life is irreplaceable and we obviously can’t put a valuation on that. However, your home and your auto are replaceable, but only if you have the proper coverage. You’ve worked over 40 years to build that life and home. Now, you tell me, is it worth compromising the coverage of replacement value in the event of a complete loss just for $50.00?”

Mr. Smith: “No, but, how is it that those other companies I see on TV can be less?”

The Agent: “Because they can either reduce your liability or your replacement cost to make it cheaper. We all have the same formula to work with and it’s just about manipulation of the numbers in order to obtain a lower price. But, like the police or fire department, if you reduce your coverage, you stand to incur a higher risk of a loss. You basically get what you pay for. You cannot receive the same benefit for less money, just less coverage for less money. Does that make any sense?”

Mr. Smith: “Yeah, I guess it does. I never really looked at it like that.”

The Agent: “One last thing. Next time when you’re watching the news and it always seems that there is some area in the U.S. that is experiencing either a flooding, forest fire or tornado. Pay close attention to the devastation. Think about the loss that each person endured and then think about what they think about insurance at that point in their life. It may not replace the memories or some very personal items that they just lost, but it will replace the roof over their heads and the transportation that they drive to go to work, school or where ever necessary. It’s a peace of mind, a security to know that you can rebuild your livelihood back to what it was before the loss.”