May 1, 2024

5 Insurance Shopping Myths in California

How Shopping for Pasta during the Pandemic and Buying Insurance Right now are similar

Five Common Insurance Shopping myths you will find online [and why they dont pertain to you]

A quick read of the interent and how to save on home insurance will repeat the same five to 10 myths over and over. Unfortunatly in this day and age – many of these techniques no longer apply.

The reasons that many of these myths dont work is becuase they are dated ideas, overly simplistic, filled with optimism, and/or do not reflect the changing nature of personal insurance during the age of inflation and climate change. We will go through each of these one by one.

A Similar Story to Today’s California Insurance Problem…

Do you remember shopping at your local grocery store during the pandemic? You would go in and the shelves would often be bare. Your spouse may have sent you in looking for spaghetti with pesto but all there was – was linguini with red sauce. And…you got the last box, the one with the dent in it? This is essentially the situation that we are now in with insurance in California.

Five Myths of Home Insurance, the Current State:

This website has reviewed on numerous previous posts that the world of insurance in California is in horrible state. That insurance inflation [or insuranceflation] is accellerating, that reinsurance rates are going through the roof, and numerous solid insurers, such as AIG, and even State Farm are pulling out of California.

That is the trend line, down and to the right. And not good. How low will it go? No one, including this broker agent knows. To that end we have created the five biggest myths in the California home insurance market in the year 2024. Read on and Enjoy. Contact Marindependent with questions.

Myth Number One – Shop Around:

We have all seen this thousands of times. It is such a common suggestion its surprising that it does not work the way you might think it may. The general idea to this one is that if you check with home insurance companies will find one that charges less for insurance. Less is generally considered good to consumers with regards to the premium. [Please see our last bonus myth on this one too].

There are two main issues with this though. And I am avoiding the fact that many broker agents [such as myself] do this for our clients to begin with. One – Frankly its best to shop insurance agents and not insurance policies. The why of this is complicated. However succinctly stated – most consumers do not understand insurance. How on earth are these individuals going to fully get the difference between policy one vs policy two. When folks ask me Why Insurer Acco is expensive and MerCo is Cheap – its hard not to smile sometimes.

The second and perhaps bigger reason that these words of wisdom no longer are valuable is that so few insurers are even writing insurance right now that its more a question of shopping around to find an insurer that will even take your property. And if you do have current home insurance right now – the wisdom of switching insurers in the current market is unclear.

Myth Two – Bundle and Save:

Bundling is great when it can be done and actually save you money. But just the concept of bundling does not actually mean that you are saving money [nor getting better coverage.] Bundling generally refers to buying home, auto, and umbrella together through three policies from one insurance group. This is something that I would categorize as old advice that really does not pertain much in California at the present moment. First – there are few insurers as of the writing of this article that are accepting homes in California and also accepting autos. The wild insurance market has changed all of this. Second the idea that bundling creates the same coverage as two policies from two different insurers is just an assumption and is often not true.

Another type of bundling pushed by the industry is bundling home/auto with your life insurer and this rarely if ever works out in your favor. In general I rarely find that this works out. The best life insurers judged by prices and underwriting criteria do not offer home insurance.

Myth Three – Shop by Discounts:

I really really really love this suggestion. If only you had the NASCAR home discount or your called a 1-800 number and referanced some code becuase you were a member of the American Society of Actuaries – you would save pots of money. I do not see it, I never have – and I think shopping by discounts is backwards. This is not shopping for dinner at the local grocery store and you come home with what is on sale. This is protecting one of biggest assets you have.

Part of the challenge of this myth is that countless agents work within this myth – Selling by Discount. Good Luck with that. There of course is nothing wrong with chossing an insurer and then getting a discount added. But choosing the insurer based on a discount is unlikely to help you. And of course in 2023 since so many home insurers are not currently accepting new policies this discount is pretty worthless for shoppers.

Myth Four – Protect your Home:

The general idea of protecting your home is not a bad one, and I do like it. However translating it into insurance savings – is rather difficult. Translating it into total savings is rarely possible. With some insurers in some situations you can save on insurance premiums…but probably will not save much on the total outlay side. Therefore its hard to see it as a true way to save money. Sure you can add a fire and burglar alarm system – but if it only saves you $3 a month and costs $35 – are you saving any real money here?

Another home fortification strategy that one might consider is upgrading your foundation in order to save on Earthquake Insurance. Spend $10,000 here and save $800 on quake insurance each year.

Adding internal fire suppression sprinklers can get you a discount with most home insurers. Go get a quote and run the numbers for yourself.

The state of California has recently begun mandating wildfire home protection and requiring insurers to give discounts out for this. The jury is still out on the costs, values, and efficacy of this program. There are some super simple protective measures that likely make good solid sense.

All of this is not to say that protecting your house is always a bad idea – but the numbers and or desires of the homeowner should speak for themselves.

Myth Five – Build Up your Credit Score:

This suggestion appears on most of the suggestion lists for google searches in California. And I am not entirely sure why. The practice of using your credit score to derive home insurance prices in the State of California is illegal and has been for several years. Experian says it themselves: ” Insurance companies in California don’t use credit-based scores or your credit history for underwriting or rating auto policies, or setting rates for homeowners insurance.” Source.

Why google can’t seem to figure this out is confusing to me. What is more confusing is that many of these articles don’t open up their suggestion line with a note that this practice does not pertain to numerous states.

Regardless the practice of building up your credit score to save on home insurance will not help you in California. This suggestion is not only a myth, its wrong, and is illegal. Do not listen to it – its just noise.

Bonus Insurance Shopping Myth – Save your Premum Dollars:

Although it not not commonly said – most of these myths are predicated on saving you premium dollars – not finding you the correct coverage. The general idea is that if you spend less on Home Insurance each year – You win. Of course the reverse of this is if your house burns down – the premium outlay will no longer matter and the actual coverage and claims experience will. Did you really pick the right agent? Do you understand your policy? Is that standalone garage covered? How much does that retaining wall cost to rebuild? Was the true owner of the property listed on the policy? Were you a resident when the property was destroyed? What is an FSR?

I can now imagine the flak I will get over this suggestion. Insurance is just an annaul premium number that needs to be lowered. OK – call a different agent if you believe this.

Five California Home Insurance Shopping Myths:

Those are our top insurance myths for home insurance, plus one bonus myth. Read and Enjoy. Contact Marindependent with questions you may have. As always speak with a licensed agent or broker in your jurisdication whenever you are considering adding or changing coverages. This is just a blog post and is never meant to be a detailed analysis of your situation [how could it be?].