Tips on Insurance Buying

Insurance protects consumers--while also maddening them. Shopping for the right policy can quite confusing and "consumers are really at a disadvantage," says J. Robert Hunter, director of insurance at the Consumer Federation of America. Getting paid for claims is sometimes no easier: "It has become a war of attrition," says Joseph Ditré, executive director of Consumers for Affordable Health Care.



Bloomberg.com consulted consumer advocates, academics, financial advisers, insurance agents, and adjusters for advice on how to avoid overpaying, underinsuring, or missing out on claims you deserve to have paid. Click ahead for tips and tricks of the trade.

Use Buying Guides

Agents are paid by insurers to sell their products and often sell only certain companies' policies. Some insurers offering lower prices, such as Geico and USAA, sell directly to the public. Before meeting an agent, read buying guides on state insurance regulators' websites, such as California's Insurance Dept. site to learn what insurance should cost and cover. Ask agents what they make on a sale, says Karrol Kitt, a professor at the University of Texas at Austin, and drill down on what policies cover. Ask them to verify answers with written proof. "Sometimes agents aren't as knowledgeable as they should be," Kitt says.

Be Wary Of Cheap Policies

Insurance isn't a "commodity like salt or sugar," says Bill Wilson of the Independent Insurance Agents & Brokers of America. "There can be a dramatic difference in coverage from one policy to another." One homeowners policy might cover all water damage, for example, while another might pay only if you notice it right away, excluding the effects of a pipe that has caused mold growth over a long stretch. In health care, coverage and price differences can be especially dramatic. "The cheapest is rarely the best," Ditré says.

Raise Your Deductible

"Raising your deductible is the best way to keep your premiums down," says Amy Bach, executive director of United Policyholders, a policyholder advocacy group. Even if you can afford the expensive premiums of a low-deductible policy, it should ultimately cost less to choose a high-deductible policy and create a bank account to insure your own small losses. Insurance should be for "catastrophic losses," says Rutgers University law professor Jay Feinman. For anything less, "it often makes sense to absorb those yourself."

Get Disaster Coverage

With disasters in the news, the importance of insuring a home against Mother Nature's bag of tricks is all too clear. Fire insurance won't necessarily pay out if the fire was caused by an earthquake--unless you have earthquake insurance. And coverage for hurricane wind damage might not protect you from the flood caused by the hurricane. (In Louisiana, only 29 percent of households are covered for floods, according to its insurance commissioner.) Flood insurance is available through the federal National Flood Insurance Program for an average of about $600 per year. On coastal areas and beachfront, coverage can be far more costly.