How to Pick the Right Insurance Company For You

Whatever you do, don't believe the advertising.

Insurance companies pay millions of dollars each year to promote themselves on television and radio and in magazines and newspapers. The advertising slogans used by these companies have become a part of the American vocabulary.

"Get Met. It Pays."

"You're In Good Hands With Allstate."

"Like a Good Neighbor, State Farm is There."

The purpose of all this advertising is to convince you that if you buy insurance from them, your life will be better, your worries will be over, and you'll be dealing with folks just like you who only want what's in your best interest.

Don't believe it for a second, and whatever you do, never pick an insurance company solely on the basis of its advertising. There's only one consideration that should guide you in deciding which insurance company to give your business to, and that is whether or not the company pays legitimate claims quickly and fairly.

Obviously, you don't want to rely on the assurances of the salesperson about this most important consideration. No insurance salesperson will ever tell you his company does a lousy job with claims. To learn the truth about a company's reputation when it comes to claims paying, talk to the people to whom it makes those payments. If you're buying an automobile policy, call local repair shops and ask them what they think of the company's claims paying policy. If you're purchasing health insurance, call local hospitals (especially the one where your doctor has admitting privileges) and ask the people in the accounting department what they think about the way the company pays its claims, and ask your doctor's office manager what he or she thinks about the company's claims handling.

Some experts suggest you look at ratings of insurance companies, such as those issued by A.M. Best or Standard and Poor's. These ratings are supposed to tell you about the financial stability of a particular company. It won't hurt to look at these ratings, but don't put too much faith in them. In 1990, Executive Life Insurance of New York and California was given the highest rating possible by both services; in 1991, the company went insolvent, and thousands of policy holders waited and worried for months while regulators tried to figure out how to put together a plan to pay at least some of the promised benefits. Although both Best and Standard and Poor's claim to have tightened their standards since the Executive Life failure, it remains to be seen just how much more effective the new ratings systems are.