A few weeks ago, I wrote about preparing for the hurricane season by stocking up on essential supplies and making sure you have enough insurance coverage. One easy way to make sure you have the proper coverage is to insist that your insurance agent review your policy for you and advise you. After all, your agent is making money off the premiums you are paying – make him earn it.
One of the biggest misconceptions in insurance is the role of the insurance agent. In fact, I fed into this misconception by referring to “your agent.” Really, the agent works for one specific insurance company, like State Farm, or for various insurance companies, “shopping” your property to several companies to find the best coverage for the lowest rates. Often, an agent is not working for you. While an agent may help you find a good policy for a low rate, this is typically where the work for you ends. In most instances, the agent has no duty to advise you on how much insurance you need or if certain exclusions in your policy could be problematic. In fact, there is no duty to advise at all in most states, absent a legally defined “special relationship.”
While the definition of a special relationship is different in every state, the differences are usually slight. For there to be a special relationship, there usually has to be a long standing relationship (years). However, that alone is not enough. Additional requirements, such as agent holding himself out as an expert in the given area where you have requested insurance, promises from the agent to assist with your risk assessment, or a separate payment to the agent in exchange for advise, must be present. Most policyholders cannot show they have a “special relationship” with their agent.
As I was able to make an underwriter concede at his deposition last week in San Francisco, insurance contracts contain “insurance-eese.” When faced with confusing issues, we usually go to experts who can help us. An insurance agent usually will give the advice for free so long as you ask.
The moral of the story is that you should email your agent and ask questions. Get him to respond to you via email and make sure you tell him that you are relying on his answers and any other advice he can give you. Ask “your agent” to do more than simply send you a renewal letter once a year and take a portion of your premiums for it. Insist that he help you understand what insurance you need and what insurance you have. If he is unwilling to provide that for you, perhaps you should find somebody who will. The agency business is highly competitive – there are agents who will gladly give that free advice. When you make them work for you, you have an extra layer of protection against disaster.