Homeowners insurance is a very important part of the contract to purchase a home, or other real estate, for that matter.
Lenders require the borrower to acquire the fire hazard insurance before taking the title to the property as a protection against damages caused by a fire, severe storms, or other natural hazards.
It is very important for home buyers to shop for a homeowners insurance with the same diligence as when shopping for a mortgage and carefully compare the coverage, deductibles, and exclusions.
I wanted to share with you two quotes for auto insurance for one and the same car prepared for one and the same person that was issued by State Farm Insurance. The quotes truly are an eye opener and raise many questions. By the legal standards in this country those quotes cannot be called a fraud as every business is entitled to have a ”freedom” to develope their own business strategy as they see it fit. See below and judge for yourself.
I erased the name to protect the identity of the person involved.
Note that both quotes are for 1975 Volkswagen Beetle 2DR. Both quotes have $100, $500, and $200 deductibles.
However when you look closely at the LIMITS you can notice that one quote offers 250/500/100 Limits at a 6 months premium of $74.89 or $12.48 per month.
The second quote offers only 100/300/100 Limits at a 6 months premium of $73.42 or $12.24 per month.
This is ONLY $0.24 (24 cents) difference in pricing despite the huge difference in coverage due to lower limits.
250/500/100 LIMITS $12.48 per month
100/300/100 LIMITS $12.24 per month
It is extremely important to understand here that the federal law does NOT put the same burden of disclosure on insurance agents the way it puts on real estate agents. REALTORS are obligated by law to disclose virtually everything to their clients as well as obey Fair Housing Laws.
Because of Agency laws, REALTORS owe fiduciary duty to their clients, sellers and buyers - however insurance agents represent the insurance company and have the duty to protect the best interests of the insurance company, NOT the interests of a person who purchases the insurance.
Insurance agent is obligated and limited only by the business policy of the insurance company that he/she represents.
In other words, if State Farm has no requirement that obligates its agents to DISCLOSE various insurance options and the pricing, then all patrons who purchase an insurance from State Farm are at the mercy and good will of the agent…. If the agent chooses not to disclose that for $0.24 (24 cents) more the patron can double the coverage, that patron will never know….. AND if State Farm does have such a policy, why, in the spirit of fairness, not charge more equitable premiums?
Does it smell of open discrimination in a broad daylight? You bet. Does it provide an opportunity to discriminate? YES, again. Discrimination that is legalized under a business umbrella.
I am certain the same applies to the homeowners insurance.
Defence: due diligence. Shop and compare.
NOTE: The above comment represents the views and opinion of the owner of this blog, Vivianne Rutkowski, and is not a reflection of views of Keller Williams Realty. Each Keller Williams Realty office is independently owned and operated.
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This is why you ask questions when you are sitting with the agent. It takes about 10 seconds to say “And how much does the next highest coverage cost?” and about another 30 seconds for the answer. This type of thing happens everywhere. Do you think that the employee at best buy should be obligated to let you know that there is another 32″ TV just like the one you want to buy, but for $25.00 less, that’s almost as good as the one that you’re buying? Are they discriminating by not doing this?
“If the agent chooses not to disclose that for $0.24 (24 cents) more the patron can double the coverage, that patron will never know…”
-Really? They will NEVER know? There is no possible way to find out unless the agent decides to tell you? What about ASKING? I guess that would be really difficult.
“AND if State Farm does have such a policy, why, in the spirit of fairness, not charge more equitable premiums?”
-So in the spirit of fairness, State Farm should charge double what the lower policy cost? At what point do you stop this pattern? If it will cost me 10 dollars more? 100 dollars? 1000? Could you imagine: Agent-”Sir, just so you know, you can get a 100/300/100 policy for only 400 more a year!” Me- “No thank you, I know what I want” Agent- “Oh and just so you know and 250/500/100 would only be 800 more a year!” Me-”I knew what I wanted when I walked in here, thanks.”
“Does it smell of open discrimination in a broad daylight? You bet.”
-Please explain how what you are describing is discrimination. Who does, or could, this discriminate against? Shy people who don’t ask questions?
“Does it provide an opportunity to discriminate? YES again.”
-Perhaps, in a way, maybe, probably not. I have no idea who the discrimination would be against, but unless the agent outright LIES and denies a higher coverage even existing, I don’t see how this qualifies as an opportunity to discriminate. Everyone has the right to ask questions, and if the agent is lying to someone, it would be incredibly easy to figure out.
Perhaps I am missing the actual point of this article. Please enlighten me and explain how you can even imagine a possibility that discrimination could occur in this situation.
Many people, especially young, low income, unemployed, or all those who like to keep expenses to a minimum, would not even ask about the higher coverage assuming that by default 250/500/100 should cost more than 100/300/100. All honest people.
UNLESS that option is disclosed at the very beginning of the consultation by the insurer, preferably in writing, as a requirement by LAW, it leaves a huge percentage of a population at a disadvantage and at the mercy of the individual agent.
In my books, it provides an opportunity to discriminate.
All coverage options should be disclosed openly to ALL customers the way prices of all products are disclosed in all retail stores for customers to compare BEFORE they purchase.
Imagine a REALTOR selling a home to a Buyer when there was another house available on the market, in the same neighborhood, for the same price, but with all the upgrades, granite counter tops, finished basement, bigger prime lot, etc. – just because a Buyer did NOT ask about availability of other homes in that neighborhood….. That REALTOR would loose his/her license faster than the ink dries on the DPOR decision.
I am deeply disappointed that you do not see problems and ethical issues with this kind of business approach.
[...] To read another blog on deceitful Insurance coverage: http://viviannerutkowski.wordpress.com/2009/06/01/state-farm-auto-insurance-eye-opener-welcome-to-th… [...]
[...] To read another blog on deceitful Insurance coverage: http://viviannerutkowski.wordpress.com/2009/06/01/state-farm-auto-insurance-eye-opener-welcome-to-th… [...]