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It’s never been easier to buy insurance online — but is it safe?

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4 mins

From dog food to travel packages to a new car, you can buy just about anything online. Even insurance.

Buying insurance online offers greater convenience, primarily due to a faster process. Companies that sell insurance online may even enable you to skip certain steps, such as a paramedical exam that is traditionally required for life and disability insurance. (That's because they use algorithms to underwrite applicants and assess risk.)

There are, of course, downsides to buying insurance online:

  • It’s could be more difficult to customize a policy specifically for your needs when you buy online versus using an independent agent.
  • Having to provide several pieces of personal information, such as your Social Security number, through a website.
  • Fewer coverage options than what you might have access to working with an independent agent.
  • Having to file a claim on your own.

Nonetheless, buying insurance online is just as safe as buying other products and services online. So while there are certain risks, here are three best practices to follow when buying insurance online.

Make sure the website is secure

Anytime you buy something online, you need to consider security. When it comes to insurance, it’s important to know that the site is operated by a reputable broker or company - not somebody looking to commit online fraud.

You will need to provide sensitive personal information, so you'll want to make sure the company’s site is protected from hackers. While there’s no way to guarantee a website can’t be hacked, there are features to look for that demonstrate security measures have been addressed.

Make sure the company’s website URL has an HTTPS prefix, not just HTTP. The 'S' at the end signifies that site security is provided by an SSL certificate, which protects sensitive information entered into that site. (No 'S' means the site does not have an SSL certificate.)

You'll also want to check the website’s privacy policy. It should clearly communicate how your data is collected, used, and protected by the website. Other signs of a relatively secure insurance website are contact information for the company and a trust seal that indicates the website works with a security partner.

Make sure financial ratings are satisfactory

When you buy life insurance or disability insurance, you’re counting on an insurance company to provide a large sum of money in the event you die or become disabled. Therefore, you should ensure that the company that issues you a policy has superior financial ratings.

Rating agencies include A.M. Best, Fitch, Moody’s and Standard & Poor’s. These agencies assess an insurer’s ability to meet its current and future obligations to policyholders. These ratings are based on an independent investigation of an insurer’s financial health. Once they’ve fully evaluated an insurer, the agencies assign a letter grade.

You should limit your insurance purchases to companies with ratings that begin with A. B ratings are adequate, but those companies are not as financially strong. Companies with ratings that begin with other letters (e.g. C, D, F) should be avoided as they are considered financially weak.

Make sure you understand the policy you’re buying

Buying insurance online offers tremendous speed and convenience. But it means doing more research to ensure you buy the right coverage for your personal needs.

Insurance policies have many moving parts. The contracts contain several pages of dense, legal terminology. There are a number of decisions you will have to make on your own (unless you consult customer support).

If you buy car insurance or homeowners insurance online, you have to decide what your liability coverage should be and how much to make your deductible.

If you’re shopping for an individual long term disability insurance policy, you'll need to consider the waiting period, benefit length, and other policy provisions.

Buying term life insurance requires decisions on how much coverage you need and how long your policy will last.

When you work with an independent insurance agent, you can have many of the questions answered during the application process. It may also be easier to contact an agent in a local office versus trying to reach an online company if questions arise after purchase or if you need to file a claim.

Even if buying an insurance policy directly online doesn’t work for you, use the Internet to research your options, seek third-party evaluations, and get quotes.

Jack Wolstenholm is the head of content at Breeze.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published January 8, 2020
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