Budget Insurance or Scammy Scammeroni?
May 14, 2014 9:32 AM   Subscribe

We've identified a couple of insurance companies that will give us equivalent home insurance for about half what we're paying now. They're not national name-brand insurance companies. Would we regret that money saved come the next hurricane?

When we did our taxes this year, our accountant mentioned that we're paying way, wayyyy too much for home insurance. So we started looking around to price the alternatives. What we found is that most major carriers -- your State Farms and USAAs of the world -- won't write policies in our town anymore. We live on the south shore of Long Island in New York, and after Hurricane Sandy... yeah. We didn't flood, but it looks like the whole zip code has been blacklisted.

I did find a couple of smaller insurance companies, though, that specialize in just this sort of high-risk coastal property. At least one of them looks like it's recently moved into our region after doing business in Florida for some time. And their rates are good. SO good. Saving $100/month good.

So my question is: Is it safe to use a small insurance company like that? They look more or less legit from the websites, but eh, anyone can put up a legit-looking website if they want to.

Bonus: Is there some way to check up on them? Is insurance regulated enough that any insurer will be more or less the same? Has anyone filed a claim with a small insurer like this and been happy with the result? Can we save this money in good conscience?
posted by Andrhia to Work & Money (5 answers total)
The New York State Department of Financial Services may be able to assist you.
posted by Etrigan at 9:40 AM on May 14, 2014

they have to be regulated by the NYS.

It makes sense that a new entrant with an existing book of business heavily concentrated in a area with less correlated risk would be pricing aggressively. Especially when you consider that the reinsurance market as well is going through a bit of a price war. So no only do they want your premiums but they can also reinsure away some of the risk allowing them to write more premiums.

So while normally something like this stands out like a red flag - in this case you can sorta make sense of it.
posted by JPD at 10:09 AM on May 14, 2014

Ask to see a copy of the policy up front and compare it to your current one. That's the only way to know if what you are getting is equivalent.

We went with a lesser known company and got great rates and excellent service, so it is possible.
posted by peanut_mcgillicuty at 11:53 AM on May 14, 2014

I bought insurance for our Coral Springs, FL Condo after Hurricane Andrew. Allstate dropped the entire condo like a bad habit and we only had insurers of last resort. And that's exactly what they were. I wouldn't have voluntarily gone with them, but there weren't any other places insuring condos in Florida in 1995.

Insurance companies need to meet standards, they need to reserve a certain amount to pay the claims of any insured in any one catastrophic loss event. (Husbunny is an actuary, you sort of just pick this stuff up.)

Here's my concern, it's not the catastrophic loss (chances are, they've got separate underwriting in the reinsurance market) it's the regular losses that are going to be pains in the ass, and I'll bet that one bathroom flood and your rates skyrocket.

But, if you're willing to put up with some nonsense for better rates, it may be worth it. We never made a claim on our crappy insurance, so we got good rates for years.
posted by Ruthless Bunny at 2:16 PM on May 14, 2014

You can get basic financial info about any licensed U.S. insurance company on the Consumer Section of the NAIC website. If you are really interested, you can create a free account and download their recent annual or quarterly statements (warning: contains thick wall of numbers).

Another recognizable source to check would be to see if the insurer is rated by AM Best. You specifically are looking for the Financial Strength rating. Hopefully it is "B+" or higher. However, many Florida- type homeowners insurers may be unrated, so lack of a rating isn't necessarily a red flag but may be an indication of a smaller or less known company.

Lastly, probably check Google, to see if other customers have complained about their claims settlement practices.
posted by jameslavelle3 at 7:37 PM on May 14, 2014

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