Red flags when buying insurance

Bad insurance is rarely sold by obvious villains. It is usually sold by somebody pleasant, in a hurry, quoting a number that is lower than the last one you heard.

The warning signs are almost always present before the purchase. They are just quiet, and they look like ordinary sales behaviour until you know what each one implies.

The price that is much lower than everyone else’s

This is the most common one and the most misread.

A quote materially below every other quote is not usually a discovery. It is usually a different product. Something was reduced — liability limits, a deductible raised, an endorsement dropped, replacement cost swapped for actual cash value, uninsured motorist coverage declined on your behalf.

The NAIC’s framing is plain: “If an offer seems too good to be true, it probably is.”

Source: National Association of Insurance Commissioners — How to choose an insurance agent · accessed 2026-08-04

The fix is not to reject the cheap quote. It is to ask one question: what is different about this one? A good agent will tell you precisely, line by line. That answer turns a suspicious number into an informed choice — and sometimes the cheap quote is genuinely better, because the expensive one was padded.

What you cannot do is compare two prices without comparing what is behind them. That is not shopping; it is guessing with extra steps.

Pressure to decide today

There is no legitimate reason a personal insurance decision must be made in one sitting.

Rates are filed with state regulators and do not evaporate at the end of a phone call. A quote that expires this afternoon is a sales technique, not an underwriting reality.

The NAIC is unambiguous: “You shouldn’t feel pressured to choose an agent, an insurance company or a quote.”

Related, and subtler: a conversation that moves to closing before it has covered what the policy does not include. Urgency about the purchase paired with vagueness about the product is a combination worth walking away from.

Reluctance to write things down

The most informative warning sign, and the easiest to test.

Ask: “if I turn down something you have recommended, will you send me a note saying what you recommended, what it cost, and what I chose?”

The request is trivial to satisfy. An agent who is documenting properly already does it. An agent who hesitates is telling you that recommendations here are conversational and deniable — which means that if a claim is short one day, there will be no record of what was and was not offered.

This is the practice the whole Client First standard set is organised around, precisely because it is the one that protects both sides at once.

Vagueness about what is excluded

Every policy excludes things. A conversation that never mentions any of them has not covered the product.

Ask for three. Flood, earth movement, sewer backup, wear and tear, and business activity conducted at home are all common and all worth knowing about. An agent who cannot name three exclusions on the product they are selling either does not know it or does not want the conversation.

Neither is fatal on its own — but it does tell you what will happen when you have a question later.

Anything unusual about the money

Two specifics worth naming plainly.

Payment to an individual rather than to the insurer or the agency. Premium should be payable to the insurance company, or to a properly licensed agency, and you should receive a receipt and a policy. Anything else is worth stopping over.

No policy document appearing. After you buy, you should receive an actual policy from an actual insurer within a reasonable period. If weeks pass with nothing but reassurance, contact the insurer directly using a number you find yourself.

Not being licensed

This is the one that is completely checkable and almost never checked.

An insurance producer — in the NAIC’s definition, “an individual who sells, solicits, or negotiates insurance” — must hold a state licence to do that. The insurer must be licensed in your state too.

The NAIC’s guidance is to “make sure the agent and insurance company are licensed in your state,” and both can be verified through the NAIC’s Consumer Information Source or by calling your state insurance department. The same sources let you look at an insurer’s complaint record and financial rating.

Ten minutes, free, before money changes hands.

What is not a red flag

Worth saying, so this list is used well.

A small agency is not a warning sign. Neither is a captive agent representing one carrier, or an agent who says “I do not know, let me check,” or a quote that is higher than others — that frequently means more coverage rather than a worse deal.

And an agent asking a lot of personal questions is the opposite of a warning sign. Exposure lives in the details, and the ones who ask about the pool, the teenager and the side business are the ones doing the job.

What to do

Before you buy, do the two free checks: verify the producer’s licence and look at the insurer’s complaint record.

During the conversation, ask what is different about the cheapest quote and ask for three exclusions. Those two questions surface most of what is wrong with a bad offer.

Afterwards, ask for the recommendation and your decision in writing. If that request is met easily, most of this article is moot. If it is not, you have learned the most useful thing available before a claim.