It’s hard to imagine why insurance companies would give up additional premiums by underinsuring customers, but we find they do it every day. Why?
- To compete in the marketplace.
Everyone else does it and no one wants to be the first to charge more.
- To keep their good neighborly hands on your annual premium payment.
If they raise your premium, you’re likely to shop elsewhere without researching the reason for the increase.
- To limit their overall exposure and risk.
The second “half” of the coverage doesn’t garner as much premium (or commission) as the first. Selling this coverage to everyone would increase their exposure to premium ratio.
- To shift the risk to the homeowner.
If they don’t sell that additional coverage, they don’t have to pay you after a loss.
- To reduce their re-insurance expenses.
If they sell you more coverage, they have to buy more re-insurance coverage.
[You can download our handout HERE]