Choice #2 is correct, Acecycleins: I am a "cynical a$$" when it comes to insurance. Here's a recent example of why:
"Kemper decided that the only appropriate thing to do was to completely bail out of Florida, irrespective of where the damage occurred. No doubt they are now flooding the California insurance market with earthquake insurance. No matter. Now mom can't renew, and no other insurance company in the state will touch her house, completely disregarding the patently obvious fact that that a house that has stood up to every storm since 1895 is a good insurance risk.
Now mom is left to swim in the high-risk insurance pool run by the state. It goes by the communist-sounding moniker of "Citizen's Insurance" or some such stuff. They charge her TEN TIMES what Kemper was charging. On top of that, they made her buck up about $12,000 to replace the perfectly good circa 1920 "knob & tube" wiring system before they would even issue a policy."
Point taken. Sorry your Mom got the short end of that. However, every homeowner insurance company that does business in hurricane prone areas over the last decade have taken terrible losses during that time. The claims pay-out two years ago was so bad that most companies are still trying to recover from the losses. Re-insurance is the insurance that keep the insurance companies floating while paying out claims. Most every area in the country never have to deal with such situations, but if you live in coastal regions you see the results. The point of insurance is to spread the risk far and wide throughout the underwriters entire region. For some reason, after Hugo, none of these guys learned from that lesson. If the insurance companies would have spread the loss nationwide by issuing a simple two percent rate increase then FL, AL, MS, LA and TX would not have customers scrambling for insurance coverage because the accuaries screwed up the filings (or simply ducked out) in the first place. Homeowner insurance is tougher than what I do (strickly toys) because homeowners aren't told that they should re-evaluate and re-appraise every couple of years to make sure that the value of their homes are correct for the re-sale market conditions. Funny thing is no one (homeoners) in these areas think about adding flood or wind coverage, as well. So, when claims happen arguements between homeowners and insures ensue. Sadly, these things happen, but if agents would better explain coverage and what they can buy as supplements to that coverage we wouldn't see the attitude that you are justifiably displaying. Part of being an educated consumer, however, is asking even the most obvious of questions to agents or brokers. We agents carry E&O insurance (errors and ommisions). That insurance is for anything we do that could be misconstrued at the point of sale. If I don't give you a direct and complete answer to your question or a false answer and you sue then E&O covers my losses to make your claim right. E&O protects us from our own stupidity. Attorneys have the same type of coverage.
On the property and casualty side of M/C coverage or Auto for that matter, these types of things rarely happen when you look at insurance as a whole. There are 100's of millions of insured vehicles out there and less than 10% of claims are the cause of such mistrust in this industry. Agents really are your best solution to the problem. We make money from the carrier. Brokers make money from you for finding a carrier. Eventhough the agent is a direct rep for the company we have a customer to protect. Brokers, more or less, are looking at the bottom line. Direct business is even worse because you have no one to back you up. As an agent, if your not happy with the carrier I will find another one you will be happy with. Brokers don't go to such extremes in most cases. Direct business is wrose because they have a "kiss my a$$" attitude about you. So, in the end a local agent is looking out for you because their reputation is far more precious to them and the community than you think.