For example,  your home insurance carrier purchases an insurance contract that protects them if the losses from a catastrophe exceed $20 million.  In this case the insurance company that insures your house would pay the first $20 million in claims  and another insurer would reimburse the carrier for any amount above that amount.

The companies that provide reinsurance charge a premium to the primary carriers for the cost of the protection. Recently, the State of Connecticut Insurance Department has allowed  insurance companies to pass along their cost of reinsurance to consumers.

Why is this important to you? Well, if the carrier that insures  your home or business does not have reinsurance they may not have enough capital to pay all the claims as a result of a serious catastrophe. The question is not if a serious storm should occur it is when a serious storm occurs will your carrier have the capacity to pay the claims.

Two questions should be asked of your agent?

1. Does the carrier the agent is placing the business with have reinsurance to cover claims if there is a catastrophe?
2. Will that carrier be passing on the additional cost of the reinsurance premium to the policyholder?

Well, 26 years later I still have the same philosophy–that people should not insure the small losses that they can take care of themselves at the expense of not having enough coverage for a truly catastrophic loss. The only difference now is the deductibles are not $250, I advocate for $1000 deductibles. No one wants to part with a large deductible, however, if the philosophy is to only worry about the loss you cannot afford then you should insure yourself that way by paying out of pocket for the loss you can afford.

Putting the philosophy aside, the premium saved in many cases will more than make up the difference over time. For example, if there are two cars and the savings are $110.00 each six months by switching your collision deductible from $500 to $1000 it would take two and a half years of reduced premium payments to save the difference between the two deductibles. I think that is a risk worth taking, especially if you are a careful driver. The same holds true for your home insurance.

When you are ready to review your insurance protection plan, just contact me. We’ll design an insurance plan that meets your protection needs at the lowest possible cost.