Let me put it this way. The insurance industry is a totally rigged industry. In America, if you see a lot of agents in an industry, it is going to be a rigged industry. You can never be sure who exactly the agents are working for. Are they working for the insurance company, for themselves, or for you? Can you always trust your insurance agent to act in your best interest? Based on my personal experience, the answer is NO.
Not all agents are the same!
In the ideal case, you should be able to get exactly the same quote from different agents for the same insurance company. But in reality, the difference can be very significant. When I called one agent asking for a home insurance quote for my primary residence, he insisted that I must set the coverage of my home close to the marketing value of my house, which is about 700K. But actually, the replacement cost of my house is only about 400K. A big part of the value in the house comes from the land, which I don’t need insurance for unless there is an earthquake. In Austin, I don’t think earthquake is covered anyway. I told him that is ridiculous. The insurance agent insisted that is the policy of the insurance company, which is Travelers in this case. I didn’t believe him and contacted another insurance agent just to verify if what he claimed is true. And I found out his claim is totally not true. The other insurance agent gave me a much lower quote based on a coverage amount of 470K, which I can live with. I highly suspect the agents are compensated in terms of a percentage of the insurance premium they sell. If they sell a higher premium insurance to a customer, they will get more commission per client. That’s why some greedy agents tries to earn more commission by imposing unnecessary options when they run the quotes for you.
ACV Policy vs. RCV Policy
When you shop for home insurance, be aware that there are two types of insurances available, i.e., ACV (Actual-cash value) policy and RCV (Replacement-cost) policy. An actual cash value policy might look cheaper but will cost you a lot of money when something happened to your house. When you have an ACV policy and you have some damage to your roof, the insurance company will consider the depreciation of your roof when calculating the reimbursement cost. Let’s say if an average roof has a life time of 20 years. And your 10-year old roof is completely messed up. The insurance company will consider 50% depreciation and give you only half the year you would need to replace the entire roof. You will end up paying more than at least $10K out of your own pocket if you have an ACV policy. If you have an RCV policy, the insurance company will pay you the complete replacement cost minus your deductible. Some insurance agents might sell you an ACV policy for a cheap price without explicitly telling you about it. Be really careful about it. If you get a surprisingly cheap quote, ask if it’s an ACV policy or RCV policy. In most cases, I’d recommend you to get a RCV policy.
Comparison of different insurance companies
Some of us might have the habit of going with big and famous insurance companies, assuming they have the scale of business advantage. That’s totally wrong in this industry. The big players stay dominant by spending a lot of money on advertising and marketing and paying much higher commission to their agents. Their rate quotes are not just a little bit more expensive. They are much more expensive. Some of the big players you should definitely avoid: All state, state farm, farmers. The quotes I received from them are usually horribly expensive. The two insurance companies that I’d like to recommend are the following two companies:
Both of them are reasonably big yet offers reasonable rates. If your house has a roof less than 10 years ago, your best bet is with AAA. You would want to insurance both your cars and home insurance with AAA. AAA’s auto insurance rate is exceptionally great. I’ve yet to find any other insurance company which can beat AAA’s auto insurance rate. However, if your roof is over 10 years ago, AAA only offers 3% deductible for your roof. For a $400K house, 3% deductible is $12K. That is pretty close to no insurance on the roof. My primary house has a 15 year old roof and I have to switch my home insurance to travelers due to this reason.
Traveler also has pretty good rates compared with the rest players despite the fact that they are trying to raise my premium every year. Travelers’ home insurance rate is pretty close to AAA’s. Traveler’s auto insurance rate is a little more expensive than AAA. But Travelers does insure your old roof properly. If your primary house has an old roof, your best bet is Travelers.
If you have some rental properties, you would have to go to some of the small and unknown players to get your best rate on landlord’s home insurance. Here are some of the insurance companies I’ve found with good rates for rental properties:
HOAIC has slightly better rates than safeco and is more flexible in terms of the coverage amount compared with safeco. You can’t get insurance directly from HOAIC website. You have to get it from some agents. Here is one of the good agents I’ve used to get HOAIC on my rental properties in Austin:
Actually I got both Travelers (on my primary) and HOAIC insurance (on my rentals) from this agent. They are located in Dallas, Texas. But you don’t really need a local agent. Sometimes, an agent located in a bigger city might give you a better deal.
If you know any other good agents or insurance companies with good rates, please feel free to let me know via your comments.