FAQs

The U.S. insurance industry comprises various organizational forms. Stock insurers are shareholder-owned corporations. Mutual insurers are owned by policyholders. Reciprocal insurers involve policyholders insuring each other. Lloyd's associations have managers with personal financial stakes. Blue Cross/Blue Shield typically offer nonprofit health insurance. Health Maintenance Organizations (HMOs) provide comprehensive, prepaid health coverage. Each type has distinct ownership structures and operational models, catering to different market needs and preferences.

When selecting an insurer, focus on the company that offers the product and service you need, at your desired quality and lowest cost, regardless of its organizational structure. While economists have studied which form provides insurance most cost-effectively, results are inconclusive. Therefore, it's advisable to base your decision on other factors, particularly the financial stability of the company.

Insurance agents can be either independent or exclusive. Independent agents work with multiple companies and can offer more options and objective advice. Exclusive agents are employees of a single company, limiting their product range. Independent agents often provide more personalized service, including direct claim assistance. Exclusive agent companies may require policyholders to use centralized customer service. The growth of independent agencies in recent years suggests their enduring value to consumers.

Purchasing insurance without an agent may seem cost-effective, but it often comes with drawbacks. While direct-to-consumer insurers claim to offer better pricing by eliminating intermediaries, they often incur high marketing and operational costs. Without an agent, you may miss out on personalized, expert advice and local service. Agents can provide in-depth product knowledge, customized solutions, and ongoing support. Direct purchases may result in less comprehensive coverage or impersonal service from less experienced staff.

Several rating agencies evaluate the financial strength of insurance companies. These include A.M. Best Company, Standard & Poor's, Weiss Research, Duff and Phelps, and Moody's. They analyze various data to assess insurers' financial stability, which is crucial for consumers when choosing policies. Each agency has its own rating criteria, so ratings may vary. It's recommended to check ratings from multiple agencies to get a comprehensive view of an insurer's financial health before making a decision.

Information about major U.S. insurance companies is available in industry publications. Best's Review (Life and Health Edition) regularly features data on assets, premium income, and products of leading life insurers. Its counterpart, Best's Review (Property and Casualty Edition), provides statistics on large property-casualty insurers. Both are published monthly by A.M. Best Company and are often available in public libraries of medium to large cities.

When applying for insurance, you'll be asked various questions including demographic information and risk-related queries. For auto insurance, this might include your driving history and vehicle details. Insurers use this information to assess your risk profile and determine if you meet their criteria. If accepted, your responses help determine your premium rate. This process, known as underwriting, allows insurers to evaluate potential policyholders and set appropriate premiums based on individual risk levels.

Reducing your homeowner's insurance premium is possible through various measures. Installing security features like deadbolts, window locks, and alarm systems can lead to discounts. Fire safety improvements such as smoke detectors and sprinkler systems may also lower costs. Many insurers offer multi-policy discounts, so consider bundling your home and auto insurance with the same company. These steps demonstrate reduced risk to insurers, potentially resulting in lower premiums.

Physical exams aren't always required for life insurance. Many companies offer non-medical policies based on application questions. However, an exam may be necessary if you have serious health issues, a terminal illness, or are seeking a large coverage amount. Insurers reserve the right to deny coverage if you refuse a required examination.

Insurance companies generally have the right to deny coverage based on preexisting conditions, with few exceptions. A preexisting condition is a medical issue known to the applicant before seeking coverage. Such conditions can affect both insurability and premium rates. Insurers use this information to assess risk and determine appropriate coverage terms.