EFT And Your Insurance Policies – There Are Many Benefits For You!

I was listening to the radio this morning and heard the news that very soon, the Social Security Administration will no longer pay benefits by check.  Right now, 93% of payments now are handled by Electronic Funds Transfer, or EFT voluntarily but now the federal government wants to wean that last 7% off of paper checks.   I have seen a similar trend in the insurance industry with less and less people paying their monthly insurance bills by check and opting for EFT payments instead.  And there are greater benefits to you of signing up for EFT payments than you might initially think.

Let’s begin with benefits that your insurance company may offer you if they don’t have to send out a paper bill and then process your paper check each month.  With your billing process set up on email and EFT, they will save money.  Going back to my original example with social security checks, the federal government says they can save over $100 million per year by converting all social security recipients to a direct deposit system.  Those savings are realized by insurance companies as well.  And some of them will share these savings with you.   For instance, Auto Owners Insurance will apply a $5 credit to your policy if you sign up for paperless processing with them.   And nearly every insurance company will waive the monthly installment fee on your policy if you sign up for EFT.  With some of them charging as much as $5 per installment per policy, this can add up in your favor pretty quickly.

Here’s a big advantage that policyholders who choose EFT billing from insurance companies gain: cancellation protection.  Imagine if you are out of town when your monthly bill comes in or if your monthly invoice just gets lost in the mail and you fail to pay it.  In the worst case scenario, you might have an uncovered loss that could destroy you financially.  But on the other end of the spectrum, you might still have to pay fees to reinstate your policy or you might owe fines to your license tag agency for a lapse in coverage on your auto insurance.   With EFT, you don’t risk a cancellation of your policy for nonpayment of premium, unless of course you don’t keep enough money in your account to cover the EFT payment withdrawal.

One of the most common objections that I hear from customers who are considering EFT for their insurance policies is that they don’t trust their insurance company with access to their bank account.   Or that they will end up with bounced checks because of an EFT charge they weren’t prepared for.   While I understand where this is coming from, I think these fears are mostly without merit.  EFT charge errors are extremely rare and in our experience, insurance companies are quick to correct their errors and pay any bank charges that they may have caused.  The fact is that you are going to have to pay the insurance payment one way or another so you will need to have the money in your bank account either way at some point.  But EFT provides you with one additional benefit to help prevent the overdraft problem.  They will let you choose which day of the month the money will be withdrawn.  So, if you get paid on the 1^st and the 15^th of the month for instance, you might want to choose the 19^th as the withdrawal date so that you are confident that you have money in your account each month to cover the EFT withdrawal.

One slightly different version of the EFT idea that I like even better is the automatic credit card charge for your insurance premiums.  There are two distinct advantages with using your credit card.  First of all, you won’t need to worry about keeping enough money in your checking account to cover the charge as you will be able to just pay it off when the credit card payment is due.  Secondly, if you have air miles or some other perks program on your credit card, you can now apply your insurance expenses to those perks and increase the benefits for yourself.

At Clinard Insurance Group, in Winston Salem, NC, we insure thousands of families all across North Carolina with their home insurance, auto insurance, life insurance and even their business insurance.  We would love to help you and your family find the best protection at the lowest possible rates.  Please give us a call, toll free, at 877-687-7557.

The New Political Football In North Carolina – Homeowners Insurance Rates

While the general public may not know it, anyone in the insurance business will tell you that the homeowners insurance market is in a state of turmoil.  Here’s why.  Whether you believe their crystal balls or not, most every insurance company that sells home insurance in this state has come to believe that they need higher rates in order to avoid losing money on those policies.  But the insurance companies  can’t simply raise their rates on their own because the rates that they can charge are regulated by the NC Insurance Commissioner.  The Insurance Commissioner is an elected position and it appears to me that our current commissioner must believe that raising homeowners insurance rates will jeopardize his political position and may even cost him his job at the next election.  When you put all of this together you have a volatile situation that can create problems for the insurance consumers here in North Carolina.

Recently I watched a Fox News story about this problem and I was struck by the man in the street interviews in that segment.  Fox News asked random strangers what they thought about the insurance companies needing higher rates.  To a person the same response was given by every person interviewed:  insurance companies are charging too much already and the insurance commissioner is doing the right thing by keeping rates low.  I don’t blame people for thinking this if they haven’t studied the problem, or if they haven’t thought through the ramifications of this kind of stance, but in truth, this kind of thinking is what gives the Insurance Commissioner his power and allows him to take the stand against rate increases that is creating so much misery in the homeowners insurance marketplace right now.  It’s really pretty simple.  If insurance companies can’t make a profit, then they will leave.  Those that choose to stay will have less competition and will have to find some other way to make a profit.  Right now their choices are to run an end run around the Commissioner to increase rates on a policy by policy basis, or take away or limit some of the protections currently included in the policy.  Much as we may wish it, we can’t squeeze water from a stone and if we continue to try and force insurance companies to lose money in this state we will see fewer and fewer choices for our home insurance in the future. 

Here’s a quick look at four trends that are happening in the NC homeowners insurance marketplace and the impacts that they are having on insurance consumers in NC.

The first trend is the bundling of home and auto insurance.  If you want to purchase homeowners insurance in NC, it is a strong possibility that you will have to bundle your auto insurance policy with that home policy or you will not be able to buy the home insurance.   Stand alone home insurance policies are called monoline home policies.  While 2 or 3 years ago, most insurance companies would happily write a monoline home policy, now  you would be hard pressed to find an insurance company that will do this for you.  The reason is simple.  Insurance companies can make a nice profit on your auto insurance but not on your home insurance.  Therefore, they will only write the losing policy (home), if they also get to write the winner (auto).  If you have both, this is not a huge problem although it does narrow your choices as a consumer.  But it is starting have a very negative impact on some senior citizens who have turned in their licenses and no longer drive and thus don’t have an auto policy.  Now they are losing their homeowners insurance and may have no way to get a new policy in place. 

Another trend that is becoming more and more common is the use of consent to rate forms in order to both cancel existing homeowners policies and to increase the rates on some homeowners as much as 250% or more.  This is an extremely inefficient way to increase rates as it is done on a policy by policy basis and is like trying to hammer a nail in with a sledge hammer.  For a more detailed understanding of why consent to rate is a problem for consumers and insurance companies alike, please read my blog on this topic by clicking here.  Oh, and if you receive a consent to rate form in the mail from your insurance company, please don’t just sign it and send it in without first consulting an insurance professional.  Give us a call at 877-687-7557 and we will help you understand your options.

The third trend illustrates how if insurance companies can’t get the rates they need to stay profitable, then they will start reducing the coverage.  We are now seeing most insurance companies increasing the minimum deductibles on all homeowners insurance policies that they write.  Long gone is the option for a $250 deductible and with some insurance companies you may not even be able to choose a $500 deductible option.  In addition, some insurance companies have also changed their deductible clause to double your deductible if you have a loss from wind or hail.  This change, and the next one I will mention shows you that the biggest loss problems that insurance companies have in this state come from wind and hail claims.

The last trend, which is still pretty rare but will probably be common on all policies in the next year, is the change in coverage on your policy for your roof from replacement cost protection to actual cash value protection  Insurance companies are now working on wording in their policies to make this change in the event of wind and hail claims for damages to your roof.   Right now, almost all policies will replace your damaged roof with a brand new one, even if your roof is almost completely worn out.  But in the future, this protection will be removed from your policy completely, or at best, you will have to pay an extra premium to get replacement cost protection for your roof added back to your policy.  Actual cash value protection means that when settling your roof damage claim, the insurance company will not pay you what it takes to replace your roof, but rather will pay you the replacement cost of your roof minus any depreciation for your current roof based on its age.  So, if you have a 20 year roof that is 19 years old, then you can expect to receive 5% of what it will take to put a new roof on your house after it has been damaged by wind or hail.  That could put a whole lot of homeowners in a difficult financial position.

The truth is that whether we like it or not, if insurance companies are unable to make a profit writing homeowners insurance in NC, then they will do one or more of three things.  Either quit and leave our state, or find ways to raise rates outside of the Insurance Commissioner’s control, or reduce the protections provided by the homeowners insurance policy.  All of these choices lead to unpleasant surprises for the consumer.  It is time for our Insurance Commission to stop playing politics with homeowners insurance in NC and let the free market operate in a way that will keep insurance options and choices open for all consumers.

At Clinard Insurance Group, located in Winston Salem, NC, we help advise thousands of families all across the state with their personal and business insurance needs.  We are dedicated to helping you find the best possible options for your home insurance, your auto insurance, your life insurance, and even your business insurance.  We would be happy to answer any questions you may have.  You can reach us by phone, toll free, at 877-687-7557.