Scene. Set. Action.

A family is sitting together in living room. Mom passes out copies of the homeowners and car insurance policies. One by one, everyone bows heads, look at the front page of the policy and reads aloud the definitions of the policy. Then, the…

Stop. Stop, stop stop. What? When is the last time anyone has read their entire policy. Or better, everyone covered has read the policy? Aloud? Ok, compliments if you answered “Yes” to all three questions, and congratulations you are the first person to do so. Please write us.

For the majority of folks still reading, let us know if you want to get your insurance geek on. We are happy to run through questions with you. Here’s some simple notes on the topic.

3 Most Important Items of purchasing insurance are:

Company and its Financial Rating.

Ratings agencies like AM Best, Fitch or Demotech publish annual reports on insurance companies and assign a rating score. The higher their rating, the more likely their financial solvency.

When purchasing new insurance or perhaps changing insurance companies, consumers who want to dig deeper should take a look at the insurance company’s size and its solvency. Two key industry measurements are “Policyholder Surplus” and “Combined Ratio”.

Generally speaking, these two terms indicate the total funds available to pay claims and the amount of total annual premium the company paid in claims and operating expenses. On liquidity, typically the larger the company the better. On performance, the insurance company that manages expenses and selects above average risks is the healthiest.