FAQs

The insurance industry includes companies structured in several different ways, each operating under a distinct organizational model.

Stock insurers are corporations owned by shareholders. These shareholders elect a board of directors to oversee the company and hire management to run day-to-day operations. Insurance policies are sold to customers, who are not required to be shareholders.

Mutual insurers are owned by their policyholders. When you purchase a policy from a mutual insurance company, you also become a partial owner of the company. Profits are typically used to improve services, reduce premiums, or be returned to policyholders as dividends.

Reciprocal insurers, also known as reciprocal exchanges, are organizations in which policyholders agree to insure one another. These exchanges are managed by an attorney-in-fact and operate in a manner similar to mutual insurance companies.

Lloyd’s associations are insurance organizations where the individuals managing the policies also have personal financial responsibility for the risks they underwrite. This structure aligns decision-making closely with risk management.

Blue Cross and Blue Shield organizations are traditionally nonprofit, community-focused health insurance providers, though some now operate as for-profit entities. They typically offer traditional health insurance plans and related healthcare coverage.

Health Maintenance Organizations (HMOs) provide comprehensive healthcare coverage through a prepaid model. Members pay a premium and receive medical services through a network of healthcare providers, often with minimal out-of-pocket costs.

From a customer’s perspective, the most important consideration is finding an insurance company that offers the coverage and service you need at a quality level you expect and at a competitive price—regardless of the company’s organizational structure.

Studies have examined whether one type of insurer consistently provides insurance at a lower cost than others, but the results have been mixed. As a result, choosing an insurer is often best based on other key factors, such as the company’s financial strength, reputation for customer service, claims handling, and long-term reliability.

Some insurance agents are paid employees of an insurance company, while others operate as independent business owners. This difference is based on how insurance companies choose to distribute their products, and it can affect the type of service you receive.

Insurance products are generally delivered to customers through independent agents or exclusive agents. Historically, most insurance agents were independent business owners who earned commissions and represented multiple insurance companies. More recently, many insurers have adopted a model in which agents are paid employees who represent only one company. These agents are referred to as exclusive agents.

Independent agents have the ability to shop insurance coverage with multiple insurance carriers, allowing them to compare options and help clients find policies that best fit their needs. Because they are not employed by a single insurer, independent agents often have greater flexibility to provide objective advice, personalized service, and direct guidance when claims questions arise.

Exclusive agents represent only one insurance company and typically offer policies from that single provider. In many cases, policyholders may be directed to a centralized customer service or claims phone line rather than working directly with their agent. Contacting a claims hotline may create a claim record, even if the loss is ultimately not covered.

When choosing an insurance agent, the most important considerations are access to coverage options, quality of service, and the level of personal support you value. Many customers appreciate the long-standing, personalized service offered by independent agents, which continues to be a trusted approach for insurance consumers.

Many property and life insurance products can be purchased without working with an agent. In these cases, consumers are often reached through online advertising, direct mail, or by calling a toll-free number to apply for coverage. While these companies frequently promote lower prices by claiming to “cut out the middleman,” the cost savings are not always as significant as advertised.

Direct-to-consumer insurers invest heavily in advertising and centralized operations, which can offset any perceived savings. As a result, customers may receive coverage based primarily on price, along with limited personalization and service provided by call-center representatives rather than a dedicated insurance professional.

By working with an independent insurance agent, customers benefit from personalized guidance, consistent support, and the ability to speak with the same trusted professional over time. An agent can help explain coverage options, provide objective advice, and assist before, during, and after a claim—offering a level of service and continuity that is often unavailable when purchasing insurance without an agent.

Insurance is a promise to pay for future losses in exchange for a premium paid today. Because claims may be paid many years in the future, it is important to consider the financial strength of an insurance company when choosing coverage. A financially strong insurer is better positioned to meet its obligations and pay claims as promised.

To help consumers make informed decisions, several independent organizations—known as insurance rating agencies—evaluate and rate the financial stability of insurance companies. These ratings reflect an insurer’s ability to meet its ongoing policy and claims obligations.

Well-known insurance rating agencies include A.M. Best, Standard & Poor’s, Moody’s, Weiss Research, and Duff & Phelps. Each agency analyzes financial data from a variety of sources and applies its own methodology and rating standards. As a result, an insurer’s rating may differ slightly from one agency to another.

For this reason, consumers are often encouraged to review ratings from multiple agencies to gain a broader understanding of an insurance company’s overall financial health. Doing so can help provide confidence when selecting an insurer and evaluating long-term coverage decisions.

Information about the largest insurance companies in the United States can be found in industry publications such as Best’s Review. The Life and Health Edition regularly includes data on assets, premium income, and products offered by major life insurance companies operating nationwide. Its companion publication, the Property and Casualty Edition, provides statistical information on large property and casualty insurers.

Both publications are produced by the A.M. Best Company, a widely recognized authority in insurance industry analysis. Many public libraries—particularly in medium to large communities—maintain subscriptions to one or both editions, making them accessible resources for consumers and researchers.

When you apply for an insurance policy, you will be asked a variety of questions designed to help the insurer understand your situation and level of risk. These typically begin with basic information such as your name, age, address, and other identifying details. In addition, insurers ask more specific questions related to the type of coverage you are applying for.

For example, when applying for auto insurance, you may be asked about your driving history, including prior accidents or traffic violations, as well as details about the vehicle being insured. This information helps the insurer evaluate how likely a loss may be to occur.

Insurers use this information for two main reasons. First, they determine whether your risk profile aligns with the type of customers they insure. Some companies focus on lower-risk individuals, while others may specialize in higher-risk situations. Second, once the insurer decides to offer coverage, your answers help determine the premium you will be charged. Generally, applicants considered higher risk are charged higher premiums than those considered lower risk.

This evaluation process is known as underwriting. The underwriting department’s role is to decide whether to offer coverage and, if so, to assess the level of risk so the appropriate premium can be assigned. In simple terms, underwriting ensures that insurance pricing is fair and reflects the level of risk being insured.

There are several ways you may be able to reduce your auto insurance premium. Start by speaking with your insurance agent about available discounts, which may include multi-vehicle discounts, renewal or loyalty discounts, claim-free discounts, good student discounts, driver training or defensive driving courses, and savings for safety features such as anti-lock brakes, airbags, and anti-theft devices. You may also qualify for additional savings by bundling your auto insurance with other policies, such as home insurance.

In addition, ask your agent how adjusting your deductible may affect your premium. Choosing a higher deductible can often lower your insurance cost, but it’s important to select an amount you would be comfortable paying out of pocket in the event of a claim.

Insurance companies often offer lower premiums to homeowners who take steps to reduce the risk of theft, accidents, and property damage. You may also qualify for savings by bundling multiple policies, such as home and auto insurance, with the same carrier.

Here are some common ways to help lower your homeowners insurance premium:

• Secure your home with deadbolts and window locks
• Install a security system with an exterior alarm and monitoring service
• Install and regularly maintain smoke detectors
• Add a fire sprinkler system
• Install a fire alarm that automatically alerts the local fire department
• Bundle your homeowners and auto insurance with the same insurer

Taking these preventive measures can improve your home’s safety and may result in meaningful insurance savings.

You may be able to lower your boat insurance premium by taking advantage of safety equipment and boating education discounts. Many insurers offer savings when your boat is equipped with approved safety and navigation features.

Check with your agent or broker to see if you qualify for discounts if your boat includes equipment such as GPS, ship-to-shore radio, VHF radio, depth sounder, fume detector, alarm system, or a Halon fire-suppression system. Completing approved boating safety courses may also make you eligible for additional savings. If you have completed a U.S. Coast Guard–approved certification course, be sure to ask your insurance company about available discounts.

“Full coverage” is a commonly used term that generally refers to the legally required or most commonly requested auto insurance coverages. However, it does not mean that every possible situation is covered without limits or exclusions.

Typically, “full coverage” includes Bodily Injury Liability, Property Damage Liability, Uninsured and Underinsured Motorist Coverage, and coverage for damage to your vehicle—often referred to as Comprehensive and Collision. It may also include optional coverages such as rental reimbursement, towing or roadside assistance, and coverage for custom or additional equipment.

The best way to know exactly what your policy includes is to review your auto insurance declarations page, which lists the specific coverages and limits you have selected.

Coverage varies from state to state, so you should consult your insurance agent for specific details. Generally, you are covered only for liability to third parties unless the vehicle owner is a resident of your household or the vehicle is furnished for your regular use. In many states, physical damage to the borrowed vehicle is not covered. Any coverage provided is typically in excess of the coverage carried by the vehicle owner.

It is recommended that you keep a booklet detailing your personal property or a video recording of your belongings. Having a complete inventory at the time of a loss can save you thousands of dollars, as it is difficult to remember everything and items not documented may go unclaimed. This inventory should be kept in a safe place, preferably away from your home, such as a safe deposit box or with your insurance agent.

It is also a good idea to keep receipts for major purchases and any additions or improvements made to your home. These can serve as proof of purchase in the event of a claim and should be stored securely. Finally, take photographs or videos of your belongings. For items such as china or silverware, lay them out so the number of pieces and design details are clearly visible. Keep all photos and receipts in a safe place.

If you have auto insurance on a personal vehicle that includes full coverage and rental reimbursement, you may not need to purchase additional insurance. However, be sure to verify your coverage with your insurance company.

Rental car coverage applies only if your vehicle has rental reimbursement coverage and is in the shop due to an accident. It does not apply to vehicles undergoing repairs for mechanical failure.

Yes. All licensed drivers living in the household must be listed on the auto insurance policy unless they have their own auto insurance elsewhere.

An auto insurance liability policy typically covers the following individuals:

• Named insured – The person or persons listed on the policy, regardless of which vehicle they are driving.
• Spouse – Even if not specifically named on the policy, the spouse of the named insured is usually covered, as long as they live in the same household.
• Other relatives – Family members living in the household who are related by blood, marriage, or adoption, often including a legal ward or foster child.
• Anyone driving the insured vehicle with permission – Individuals who use the vehicle without permission, such as someone who steals the car, are not covered.

This question has been considered extensively by insurance professionals and legal advisors, yet there is no single definitive answer. Determining adequate liability limits is often compared to asking, “How high is up?”—the answer depends on many factors. That said, several perspectives can help guide this decision.

When evaluating liability limits, consider the following:

• Review past judgments related to businesses similar to yours within the legal areas where you operate or sell your products or services. Even so, it may not always be practical or affordable to purchase limits sufficient to cover the largest possible awards.
• Examine your balance sheet, including assets and liabilities, to understand what you need to protect. Keep in mind that liability judgments and settlements are not necessarily limited by a business’s financial size.
• Review your income statement as another way to assess exposure, though the same concerns apply—losses can exceed a business’s income or net worth.
• Consider limits you can reasonably afford and feel comfortable carrying. While practical, this approach may still leave business owners uneasy, as legal judgments can exceed policy limits by a significant margin.
• Review contractual requirements, such as leases, service agreements, or vendor contracts. Many contracts specify minimum liability limits, which may determine the lowest amount of coverage you must carry to remain compliant.
• Evaluate industry norms by considering the liability limits typically carried by similar businesses. While specific client details cannot be shared, an experienced insurance agency can often provide general insight based on the range of businesses it insures.

Ultimately, there is no single formula for determining proper liability limits. Selecting appropriate coverage requires evaluating your business exposures, financial position, contractual obligations, and the legal environment in which you operate. A thoughtful review of these factors can help you choose liability limits that provide meaningful protection and greater peace of mind.

Yes. There are various “package” policies available that combine multiple types of coverage into a single policy. Examples include the Business Owners Package (BOP), Special Multi-Peril (SMP) policies, and other insurance company–designed packages.

Many insurers also offer specialized package policies tailored to specific industries, such as auto garages, auto dealers, jewelers, furriers, barbers and beauty salons, and apartment buildings.

Workers’ Compensation insurance is designed to protect both employers and employees in the event of a work-related injury or illness. The system represents a compromise between the two parties: employees give up the right to sue their employer for job-related injuries or illnesses, and in return, employers agree to provide state-mandated benefits.

These benefits typically include medical expenses, wage replacement, and other support related to the injury or illness. To ensure that employers have the financial ability to pay these required benefits, most states require employers to demonstrate financial responsibility. This requirement is most commonly satisfied through the purchase of Workers’ Compensation insurance.

Even with careful management practices, claims can arise if a supervisor commits a violation or if employment records are not properly documented. Claims involving discrimination, wrongful termination, harassment, or violations of disability-related laws are not covered under standard business liability or workers’ compensation policies.

To address these risks, businesses can purchase Employment Practices Liability Insurance (EPLI). EPLI helps protect your business against employee allegations related to employment practices. An especially important feature of this coverage is legal defense protection, as legal costs can often exceed the amount of the claim itself—even if the claim is ultimately dismissed.

Many life insurance companies offer non-medical life insurance, which only requires answering a series of questions on an application. However, depending on your responses, the insurer may require a physical examination. This may occur if there are concerns about impaired health, the presence of a serious or terminal illness, or if you are applying for a large amount of coverage.

If an examination is required and you choose not to take it, the insurance company may decline to issue the policy.

Yes. An insurance company can deny coverage due to a preexisting condition, with very few exceptions. A preexisting condition is a medical condition that you were aware of before applying for insurance. Such conditions may affect your eligibility for coverage or the premium you are charged.

Before purchasing life insurance, it’s important to gather your personal financial information and review your family’s financial needs. Several factors should be considered when determining the appropriate amount of coverage, including:

• Immediate needs at the time of death, such as final medical expenses, burial costs, and estate taxes
• Funds for a transition period, such as covering relocation expenses or allowing time for family members to find employment
• Ongoing financial needs, including monthly living expenses, child care costs, college tuition, and retirement planning

While there is no substitute for a careful evaluation of your specific situation, a common rule of thumb is to purchase life insurance equal to five to seven times your annual gross income.

People in their prime working years are statistically more likely to become disabled than to suffer a fatal injury. Because of this, one effective way to protect yourself, your family, and even your business may be to obtain disability insurance.

Disability insurance is designed to provide a “backup” source of income if you are temporarily unable to work due to illness or injury. Most disability insurance plans offer flexibility, allowing you to choose coverage for a wide range of conditions or, in some cases, exclude specific injuries. Selecting the right coverage can help ensure financial stability during an unexpected loss of income.

Subject to participation guidelines, a minimum of two participants is generally required to establish a group health insurance policy.

Property

• Report the loss to your insurance agent as soon as possible, providing the date of loss and a description of what occurred.
• Take photographs or video of the damage.
• Keep records of any expenses related to emergency or temporary repairs.
• Separate damaged items from undamaged items. The insurance company adjuster will need to inspect the damaged items, so do not dispose of them without the adjuster’s consent.
• Prepare a detailed list of all damaged or lost property, including when and where each item was purchased. If available, provide original receipts.
• Obtain estimates for repair or replacement of damaged or missing items.
• If the loss involves theft or vandalism, contact your local police department immediately.

Auto / Car

• When possible, report the accident to the responding police department and forward a copy of the report to your insurance agent.
• Contact your agent with the date of the accident and details surrounding the incident. Obtain a written estimate for damages from the body shop of your choice.
• Your insurance company will contact you to arrange an inspection of your vehicle. Do not begin repairs without the insurance company’s authorization.

General Liability

• Contact your agent as soon as possible and provide the date, time, and description of the incident, along with the names and addresses of all injured parties and/or property owners. Also include the names and addresses of any witnesses.
• If you are served with suit papers or any other legal documents, forward them immediately to your agent.

Workers’ Compensation

• Arrange for immediate medical treatment as required by workers’ compensation law.
• Contact your agent for claim reporting procedures. You will need to provide details such as the date of injury, employee’s address and Social Security number, and the nature of the injury.
• After the claim is reported, the insurance company will contact you with further instructions.

Note: If the claim involves a fatality, be sure to file required OSHA reports within eight hours.

If anyone is injured, immediately provide any possible first aid and call emergency services.

Exchange names, addresses, and insurance information with the other driver. Record the following details: the date, time, and location of the accident; the name and address of the vehicle owner if different from the driver; the driver’s Social Security number and driver’s license number; the names and addresses of passengers and witnesses; and the license plate numbers of the other vehicle and any witness vehicles.

Report the accident to the nearest police department and file any required reports. Cooperate fully with the police, but do not make any statements admitting fault. Do not sign any documents for anyone other than an authorized representative of your insurance company. Promptly report the claim to your insurance agent.

Note: If you plan to travel by car in Canada or Mexico, check with your agent regarding insurance requirements.

If anyone is injured, immediately provide any possible first aid assistance and call emergency services. Take appropriate steps to prevent further damage to the property. Promptly report the claim to your insurance agent.