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Insurance companies use an extensive list of factors to determine your insurance rate. Contrary to popular belief, agents do no directly impact their clients’ insurance rates. Factors such as age, marital status, gender, driving record (claims, accidents and violations), credit, home ownership status, previous insurance limits and address can all influence the rate you receive when shopping for insurance. Many companies’ rate tiers go over 1,000 with very complex calculations. This is why just because your friend or neighbor gets a good rate from one company doesn’t mean you will get the same good rate. A good independent agent can help you shop of the company that is right for you.

Your insurance carrier will pay up to the limits stated on your policy. In Arizona the minimum limits for liability on your auto policy are 15/30/10. This means your policy will only pay $15,000 per person for bodily injury or $30,000 for bodily injury aggregate/total (if more than one person is in the car) for the accident and $10,000 for property damage whether that be the car, house or personal property of another person. As you can imagine $15,000 does not go very far toward bodily injury. An extended hospital visit can easily run to $100,000 in no time. This means your policy would pay only $15,000 if you have state minimum liability and you may be held responsible for the rest if the injured party chooses to take legal action against you. Most insurance companies and professionals recommend a minimum of 100/300/100 for liability. Some companies even give better rates for people who choose that coverage. Your agent can help you determine what is best for you.

There are several different methods by which your insurance company may calculate the amount it will pay you for a loss. Payment based on the replacement cost of damaged or stolen property is usually the most favorable figure from your point of view, because it compensates you for the actual cost of replacing property. If your camera is stolen, a replacement cost policy will reimburse you the full cost of replacing it with a new camera of like kind. The insurer will not take into consideration the fact that you ran three rolls of film through the camera every day for the last two years, causing a considerable amount of wear and tear.

In contrast, actual cash value (ACV), also known as market value, is the standard that insurance companies arguably prefer when reimbursing policyholders for their losses. Actual cash value is equal to the replacement cost minus any depreciation (ACV = replacement cost – depreciation). It represents the dollar amount you could expect to receive for the item if you sold it in the marketplace. The insurance company determines the depreciation based on a combination of objective criteria (using a formula that takes into account the category and age of the property) and subjective assessment (the insurance adjuster’s visual observations of the property or a photograph of it). In the case of the stolen camera, the insurance company would deduct from its replacement cost an amount for all the wear and tear it endured prior to the time it was stolen.

The term “replacement cost” is defined or explained in the policy. Simply stated, it means the cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose. This applies unless the limit of insurance or the cost actually spent to repair or replace the damaged property is less. Refer to your policy for the exact definition and explanation of replacement cost.

The term “actual cash value” is not as easily defined. Some courts have interpreted the term to mean “fair market value,” which is the amount a buyer would pay a seller if neither were under undue time constraints. Most courts, however, have upheld the insurance industry’s traditional definition: the cost to replace with new property of like kind and quality, less depreciation. Courts have varied in their rulings as to whether or not depreciation includes obsolescence (loss of usefulness as a result of outmoded design, construction, etc.).

There are a few companies who use direct captive agents to solicit their products, such as Geico. This means that you purchase your insurance over the telephone speaking with an agent that most likely is in another state. When you call again, you will most likely be speaking to a different agent each time. There are many reasons to use an independent agent such as:

Agent can shop for you easily and quickly to find the best rate

Agent can help you determine the right coverage for you

Agent can help find discounts for you that you may have overlooked

Agent can help you during a claim if you and the insurance company are disagreeing on the way the claim is being handled.

You can meet with your agent personally and develop a personal relationship

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Please call us if you have any other questions.

801.446.4600 or Toll Free 877.446.4801

The only difference between replacement cost and actual cash value is a deduction for depreciation. However, both are based on the cost today to replace the damaged property with new property.

In short, a captive agent contracts with only one company, and is bound by that contract to solicit or sale only the products of that one insurance company. Agents of captive companies are limited to that one company as to what they can offer their clients. Examples of companies that use captive agents are State Farm, Farmers, All State, American Family etc. In contrast independent agents contract with multiple carriers and are able to offer their clients the products from anyone of these carriers. In our opinion the client benefits by having one agent who can shop the market for him or her. This is why independent agents are often referred to as brokers. As a caveat, independent agents cannot offer the products of captive agent insurance companies.

You can save money on your auto insurance by working with a good quality independent agent such as IPA. IPA can shop your insurance with multiple carriers to find the one that will offer you the best rate. Further, you can save money by combining home and auto policies together for what is called “multiple-lines” discounts and having more than one car on the same policy, “multiple-vehicle” discounts. Also, keep your driving record clear of accident and tickets as best you can. Keep your credit as clean as possible. Your agent can help you find other discounts such as alarm discounts, save driver discounts, good student discounts and others.