Insurance Quote

What Does Insurance Quote Mean?

An insurance quote is an estimated cost provided by an insurance company for a policy. Insurers often offer quotes to prospective policyholders to give them an idea of the cost of coverage from that particular insurer. Policyholders often request quotes from multiple insurers to compare prices and coverage options.

Insurance quotes consider the level of risk the prospective insured represents, as well as the desired amount of coverage. The estimate also depends on the insurer’s pricing model, the benefits offered, and other factors that influence the cost.

Requesting insurance quotes is a risk-free way to compare various insurers and their policies without making a financial commitment. To ensure effective comparisons, buyers must provide consistent information for all quotes, even if the broker or agent does not explicitly request it. For example, one broker may ask for a person’s car accident history and ticket details, while another might assume the person is ticket-free, resulting in different quotes and an unfair comparison.

Insurance quotes are not insurance contracts and cannot be used as proof of coverage. The actual coverages, conditions, and prices are finalized only after review by an insurance underwriter (or an electronic underwriting system). Once reviewed, the underwriter presents a final insurance contract to the buyer, outlining the coverages, conditions, and prices, which the buyer can either accept or decline.

Insuranceopedia Explains Insurance Quote

If a customer is seeking multiple insurance quotes simultaneously, they might consider contacting a broker. An insurance broker or independent insurance agent has access to multiple insurance companies and can provide quotes from various insurers at once. However, brokerage fees may apply for these services.

In contrast, captive insurance agents work exclusively for a single insurance company and can only provide quotes from that company. While their offerings are limited, captive agents are often highly knowledgeable about their company’s policies, rules, and conditions, allowing them to provide quick and precise answers about coverage. Brokers, on the other hand, may need additional time to consult with the various insurers they represent.

Insurance companies employ actuaries who use statistical analysis and probability models to estimate the likelihood of claims. Higher risk leads to higher insurance costs. For example, in home insurance, factors such as geographic location (e.g., proximity to water or mountains, or distance from fire stations), the home’s age, and the latest updates to plumbing or electrical systems are evaluated. If the electrical system hasn’t been updated in over 50 years, the risk of a house fire is higher, resulting in a more expensive insurance premium compared to a home with updated electrical systems that meet current codes.

Before the advent of computers and online tools, brokers and agents relied on physical insurance company pricing guidebooks to manually calculate the total cost of coverage based on a client’s information. This process could take hours or even days, depending on how well the client’s details matched the manual guidelines. If certain information was not covered in the guidebooks, brokers or agents had to contact underwriters directly to determine if exceptions could be made.

Today, insurance agents and brokers use online quoting systems to streamline this process. They input the client’s information into the system, which uses calculations provided by actuaries to generate an insurance quote. Thanks to modern technology, this process now takes only a few minutes, significantly reducing the time and effort involved.