What Does Insurance Quote Mean?
An insurance quote is an estimated cost provided by the insurance company for an insurance policy. Insurance companies often provide a quote to prospective policyholders, so they have an idea of the cost of purchasing coverage from that particular insurer. Often, policyholders ask for quotes from various insurers as a way to compare prices and coverage options.
Insurance quotes take into account the level of risk a prospective insured represents as well as the amount of coverage desired. The estimate also depends on the pricing model of the specific insurer, the benefits offered and other factors that affect cost.
Asking for insurance quotes is a risk-free way to compare various insurers and the policies they offer without having to pay or make a commitment. To compare the quotes effectively, buyers must provide the same information for all quotes, even if the broker or agent does not ask for it. For example, one broker may ask for all of a person’s car accident history and the tickets on their license, but another broker may forget to ask about this and assume that person is ticket-free — this would result in very different prices and would not be equal comparisons.
Insurance quotes are not insurance contracts and cannot be used as proof of insurance. The actual coverages, conditions and prices are not final until reviewed by an insurance underwriter (or an electronic/online underwriting system). Once the quote is reviewed by an underwriter, they present an insurance contract to the buyer with a final offer of coverages, conditions and prices that the buyer can either accept or decline.
Insuranceopedia Explains Insurance Quote
If a customer is looking for multiple insurance quotes at the same time, they may consider contacting a broker. An insurance broker or independent insurance agent has access to multiple insurance companies and may be able to provide many quotes at once. With these policies, there may be brokerage fees involved. Captive Insurance agents, on the other hand, work for one specific insurance company and can provide a quote only for their company. Agents are beneficial because they are very familiar with their companies’ rules and conditions and can provide coverage answers quickly, whereas brokers may have to check back with the many companies they use.
Insurance companies hire actuaries who use probability statistics to calculate the likelihood that a claim will be made. If the likelihood is higher, the cost of insurance will be higher. For example, for home insurance, they factor in the geography of the area (near water, on a mountain, far from fire stations, etc.), the age of the house, the date plumbing was last updated, etc. Based on these factors, they determine the likelihood of a loss occurring. If, for instance, the electrical had not been updated in over 50 years, the chances of a house fire would be higher than if everything were up to the current code, so the price to insure the house would be higher.
Before access to computers and online tools, brokers and agents would have to flip through insurance company pricing guidebooks and manually price out the total cost of each coverage based on the client’s information, which could take hours or days depending on how the prospective client’s information fit with the manual guidelines. If the information was not in the insurance company manual, the broker or agent would have to call the underwriters to see if the company would make an exception in their system.
Now, insurance agents and brokers take information about the client’s needs and input it into an online quoting system. This system takes the calculations by the actuaries and applies the client’s information to provide an insurance quote. With today’s technology, this may only take a few minutes.