Your Guide to Finding the Best Insurance
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Top Insurance Companies for 2021
As you begin shopping for car insurance, home insurance or rental insurance, where should you start? These are some of the largest insurance companies (by the number of policies written), according to insurance rating company A.M. Best.
Based in Greater Chicago, Allstate Insurance has been in business for nearly a century. The company holds a non-accredited A+ rating with the Better Business Bureau, as well as a financial stability rating of A+/Stable with A.M. Best. Allstate offers a variety of products, including car insurance, home insurance, life insurance, and rental insurance.
Based in Woodland Hills, Calif. Farmers Insurance has been in business since 1928. The company holds an accredited A+ rating with the Better Business Bureau, and a financial stability rating of A/Stable with A.M. Best. Farmers offers a variety of insurance plans, including car insurance, home insurance, life insurance, rental insurance, and umbrella insurance.
Originally named “Government Employees’ Insurance Company,” GEICO is owned by Berkshire Hathaway, but is separate from Berkshire Hathaway Insurance. GEICO holds a non-accredited A+ rating with the Better Business Bureau and a financial stability rating of AAA/Stable with A.M. Best. A full-service company, GEICO offers a multitude of products, ranging from car insurance to home insurance, rental insurance, pet insurance, and RV insurance.
Liberty Mutual Insurance
With over 100 years in the business, Boston-based Liberty Mutual is one of America’s oldest insurance providers. The company has an accredited A+ rating with the Better Business Bureau, as well as a BBB/Stable financial rating with A.M. Best. Liberty Mutual offers a variety of insurance plans, including car insurance, home insurance, rental insurance, business plans, and life insurance.
Tracing their roots back to farm insurance products, Nationwide Insurance has been based in Columbus, Ohio since 1926. The company has an accredited A+ rating with the Better Business Bureau and an A+/Stable financial rating with A.M. Best. Nationwide offers a full suite of insurance and banking products including car insurance, home insurance, rental insurance, pet insurance, and life insurance.
Progressive Insurance is based out of the Greater Cleveland area and is primarily known for their car insurance and home insurance options. The company has a non-accredited A+ rating with the Better Business Bureau and an A+/Stable rating with A.M. Best. In addition to home and auto options, Progressive offers a full suite of insurance offerings, including recreational vehicle insurance, life insurance, and business insurance.
State Farm Insurance
Headquartered in the heart of Illinois, State Farm Insurance has nearly 100 years of business experience. The company holds a non-accredited A+ rating with the Better Business Bureau, and an A++/Stable financial rating with A.M. Best. While best known for car insurance, home insurance and life insurance, State Farm offers a full suite of insurance and banking products, including checking accounts, auto loans, and business insurance.
WIth over 167 years of insurance experience, Travelers Insurance of Hartford, Connecticut is one of America’s oldest and most respected companies. The company holds an accredited A+ rating with the Better Business Bureau, and an A++/Stable financial rating at A.M. Best. Travelers offers a multitude of products ranging from auto, home, life, and even wedding insurance.
United Services Automobile Association (USAA for short) is an insurance company with limited membership. Car insurance, home insurance, life insurance, and banking services are only available to members of the active duty military, reserves, National Guard, veterans, and their immediate families. The company has a non-accredited A- rating with the Better Business Bureau, and an A++/Stable financial rating with A.M. Best.
How Does Insurance Work? Your Guide to Insurance Basics
The term “insurance” can take many different meanings, based on the type of insurance that’s being referenced. By definition, an insurance policy helps to shift or minimize risks for the policy holder. In exchange, the insured person must pay an insurance premium for an agreed upon term.
Types of coverages and claims all differ, based on the kind of insurance policy you have. What would be covered under a health insurance plan may not be covered under a life insurance plan (just like what may be claimed on a car insurance policy may not be allowed on a home insurance plan).
If you’ve ever wondered: “How does insurance work?” then this guide is for you.
What Is an Insurance Premium?
Every type of insurance plan starts with a quote. In this phase, the person seeking an insurance policy will meet with an agent or broker who’s licensed to sell such products in their state. Meetings can take place online using an automated system, over the phone, or in person at an insurance office.
During this process, the customer will be presented with a variety of coverage options to meet their needs, along with an insurance premium for that plan. The premium is the amount the insured person agrees to pay over the life of that plan. If the insured person misses one premium payment, the insurance plan can be suspended until they are caught up on payments (or may even be cancelled for non-payment).
What Is an Insurance Deductible?
In simple terms, an insurance deductible is the amount that an insured person must pay towards a covered incident or event before the insurance company makes payments towards a covered appointment, procedure, or medication. Deductibles are applied differently, based on the different types of insurance plans.
In most cases, the insurance deductible on the plan is per incident ( or accident) though health insurance deductibles reset at the end of the term, normally the calendar year. Some insurance companies offer deductible discounts to customers who don’t have a claim for the term and renew their insurance on-time. This is most commonly found among car insurance plans.
Insurance Deductible Examples
If a car insurance plan has a comprehensive coverage deductible of $500, the insured person must pay $500 out-of-pocket before the insurance plan will pay for any damages or losses. Or, if a health insurance plan has a prescription medication deductible of $250, the insured person must spend $250 on their medicines at the pharmacy before the insurance will make coverage payments.
What Is Coinsurance?
Usually related to health insurance, coinsurance is the shared amount that the insurance company will pay (along with the insured person). Coinsurance usually begins once the deductible payment is satisfied.
In the aforementioned prescription medication example, the insurance plan has a $250 pharmacy deductible, followed by 30% coinsurance after the deductible is met. After spending $250 out-of-pocket for their prescription medication, the insured person will be responsible for paying for 30% of the medication costs. The insurance company will pay the remaining 70% directly to the pharmacy.
Types of Insurance
From houses to cars, no matter what you are looking to protect, there’s probably an insurance policy that will cover it. The most common kinds of insurance plans are health insurance, car insurance, life insurance, home insurance, and rental insurance.
Health insurance primarily covers illness and injury for the insured person and their family as well as preventative care. There are three ways to get health insurance: through an employer-sponsored plan, through the government-sponsored Health Insurance Exchange, or directly from an insurance company with an off-exchange plan.
Health insurance plans are broad in nature, covering everything from chronic illness (like hypertension and diabetes) to emergency care. The amount you might pay is often based on whether you visit a preferred in-network provider or someone outside the network.
Although health insurance covers physical and mental health, most policies don’t cover regular eye exams or dental care. Vision or dental health are typically managed through separate policies.
Auto insurance plans are designed to protect drivers from liability and provide financial relief in case of an accident or other covered incident. Most auto insurance plans cover vehicle damage in the event of an accident or theft, driver liability from damage to property and other vehicles, and medical payments for injuries directly caused by accidents. Every state and Washington, D.C. requires drivers to carry auto insurance on the cars they drive.
If you’ve ever wondered, “What is term life insurance?”, you certainly aren’t alone. Life insurance comes in two variations: term life and permanent life.
Term life insurance will pay benefits in the event the individual dies during the life of the policy (usually 30 years or less).
Permanent life insurance covers the insured person as long as they live and will make a payment to their beneficiary upon their death. Because permanent life insurance guarantees a payment at the end of life, it is often significantly more expensive than term life insurance.
Although homeowners insurance is required if you have a mortgage, it covers much more than your home in the event of a fire or weather damage. A home insurance policy will cover your belongings that are stolen/damaged for a covered situation, and protect you from liability in the event someone is accidentally injured on your property. Some home insurance plans will also pay the cost of temporary housing while your home is being repaired for a covered reason. Home insurance premiums are usually paid through escrow and are often rolled into your monthly mortgage payment.
This type of insurance policy also covers the renter’s belongings in the event of loss or damages, covered reasons, and even theft. Rental insurance is paid by the renter or tenant directly to the insurance company monthly and must be renewed when the lease is renewed. Many renter’s insurance policies also cover living expenses if you are forced to move out of the rental property due to a disaster. Keep in mind the owner’s insurance policy only covers the structure.
Other Types of Insurance
In addition to the basic types of insurance listed above, there are several other speciality lines of insurance that cover everything from vacations to veterinary visits.
Business insurance protects business owners from liability associated with their industry. A restaurant may carry general liability insurance for accidents or injuries on their property while a landscaper may choose to insure their tools and equipment.
Long-Term Care Insurance
Long-term care insurance covers seniors needs for care needs that aren’t covered by Medicare. This can include in-home nursing visits, assisted living, and rides to doctor’s appointments.
Long-Term Disability Insurance
Long-term disability insurance may pay for costs associated with a disability, including inability to work based on disability. This type of insurance may offer payment for several years (or until the disability is no longer present).
Identity Theft Insurance
Also known as ID theft protection, identity theft insurance may pay for legal costs in recovering your identity. Covered reasons include credit card theft, money stolen from your bank account, or your personally-identifiable information being used to fraudulently create new accounts.
Like health insurance, pet insurance may cover illness and accidental injury for your pets. Coverage levels range from routine care (like vaccines and neutering) to death benefits.
Travel insurance is a specialized policy which offers coverage for forced trip cancellation, baggage loss, and emergency medical procedures. Travel insurance typically offers coverage when the insured person is 50 miles or more from their home.
Umbrella insurance can be considered a “safety-net policy” that covers liability or damage beyond any insurance policies you may have. For example: If you are a liable party in a multi-car accident that causes damages beyond your policy limits, umbrella insurance may pay the remainder of the claims.
How Do I Know What Insurance I Need?
Although shopping for an insurance policy can feel difficult, there are steps you can take to simplify your search. Planning ahead will not only help you determine what kind of insurance you need, but also how much insurance you need to carry.
First, consider the mandatory coverage you must have to remain compliant with lender policies and legal requirements. Every driver must carry car insurance, but if you’re still paying a loan, you will probably need to carry comprehensive coverage as well. Regardless of whether you are renting or buying, your mortgage lender or property owner will require you to have home insurance or renters insurance.
Next, consider how much you could afford to lose in the event of an emergency. If you have plenty of savings and could afford to replace your car, you might want to save money on car insurance with a higher deductible. If you own priceless heirlooms (or other high-value, irreplaceable items), it may be worthwhile to consider adding these to your renters or home insurance policy for coverage.
Finally, look at your liabilities as a whole, including your mortgage and any other debt you may owe. In the event of a major accident or loss of life where your family loses a paycheck, would you be able to maintain your quality of life? If the answer is “no,” it may be time to consider adding life insurance or umbrella insurance to your holdings.
As you consider how much insurance to hold, talk to multiple agents about your plans and get multiple insurance quotes. Through shopping around, you can get a more complete picture about how much protection you actually need.
How Do I Know What My Insurance Covers?
Every insurance plan is different and is based on multiple factors. That’s why it’s critical to know exactly what your insurance covers – and what situations are covered, too.
All insurance contracts spell out all the definitions, covered incidents, and exceptions to your policy. If you purchase additional options or benefits (such as coverage for firearms or expensive jewelry), those will be explained in a separate insurance rider.
Before you agree to any insurance policy, be sure to understand what situations are covered and excluded from your coverage. Failure to do so could result in denied claims, leaving you financially responsible for whatever may happen.
How Do I Keep My Insurance Costs Down?
Although every company has their own rate tables for insurance policies, there are some general pricing rules that they all follow.
Maintain a High Credit Score
The easiest thing anyone can do is manage their credit score. In 47 states (excluding California, Massachusetts, and Hawaii), and Washington, D.C., insurance companies consider an individual’s credit score as part of their pricing formula. The better your credit score, the better your rates. And in all states (except Maryland and Hawaii), your credit score can also figure into how much you pay in home insurance. By keeping a higher credit score, you can potentially save big on insurance costs.
Keep a Clean Driving Record
Your driving record also directly affects how much you will pay for your car insurance premium. If you have a history of speeding tickets over the past three years – or any auto accidents in the past five years – your car insurance premium will probably be higher than your state or national average. By laying off the accelerator and driving carefully, you can lower your risk on the roads – and lower your car insurance policy.
Improve Your Health
Finally, your overall health could also reduce how much you pay for insurance. Health insurance and life insurance policies are based, in part, on your overall health. Some companies will offer discounts to members if they join a gym, or go through a smoking cessation class. As you shop for insurance, be sure to look for all the potential discounts you may qualify for based on your lifestyle.
Check If You Qualify for Discounts
There are countless other discounts available on insurance plans. Some companies offer discounts to members of fraternities or sororities, alumni association members, or professional organization members. Others offer discounts if you bundle and hold multiple policies with the same company. Ask your insurance agent whether you qualify for any special discounts based on your affiliations.
Your Frequently Asked Questions About Insurance
InvestingAnswers is on a mission to help consumers build and protect their wealth through education. That is why we have experts answering your questions at the end of each article.
What Is an Annuity & How Is It Related to Insurance?
Offered by insurance companies, annuity contracts are financial products which are a hybrid of life insurance and also offer some of the benefits of a long-term investment product. In exchange for payments in the future, individuals will either pay the insurance company a lump sum or payments over a given amount of time. Unlike a life insurance plan, annuities offer payments to the insured person while they are alive. And unless the contract specifies a beneficiary to the annuity contract, the payments end upon death. Annuities are extremely complex and it is important to understand the benefits and the costs before you purchase a contract.
What Is Title Insurance?
When properties change hands, to ensure a smooth transfer, most lenders require title insurance. This type of title insurance is normally paid by the new owner at closing, though it actually is intended to protect the lienholder for the amount of the mortgage (not the owner). The owner's title insurance policy is separate and protects buyers from damages due to pre-existing or future land ownership disputes, as well as repairs needed to bring a property up to code (which were not disclosed by the sellers).
What Is COBRA Insurance and Should I Get It?
Short for the “Consolidated Omnibus Budget Reconciliation Act”, COBRA allows employees to pay an unsubsidized rate in order to stay on their employer’s group health insurance plan. This is applicable for a specified period of time in the event of an unexpected job loss, planned transition from one job or another, or a reduction in hours. While COBRA can ensure that you can keep your health benefits during a job loss, it may be cheaper to shop for insurance on the Health Insurance Exchange.
What Is Gap Insurance?
In the event of a loss of a car or recreational vehicle, gap insurance can cover the difference between the asset value and the loan balance. For example: If you buy a $10,000 car and get in an accident two years later, it may only be worth $6,500. If you owe more than that on your loan, gap insurance would pay the additional “gap” not covered by the car insurance payoff.
What Is PMI?
Short for Private Mortgage Insurance, PMI protects a lender in the event a homeowner is unable to pay for their mortgage. If homeowners have less than 20% equity in their home, their mortgage company will require them to pay for PMI to protect them from a loss.
What Is Loss of Use Coverage in Homeowners Insurance?
In the event your home is damaged and requires extensive repairs, loss of use coverage (also known as “additional living expense coverage” or “Coverage D”) can pay for some of your living expenses while your home is rehabilitated. Depending on the insurance policy, loss of use coverage may cover hotel bills, grocery bills, and additional gas needed to commute to work and back.
How Much Is Renters Insurance?
There are several variables that go into rental insurance. In addition to your rental history, the size of the rental property, and cost of monthly rent, an insurance company will also consider the property’s ZIP code and your credit score. Since people may pay the different amounts for rental insurance, which is why it’s important to get multiple quotes and talk to several insurance agents before deciding on which plan to buy.