Watching the news, I (like yourselves perhaps) couldn’t help but notice the frustrations of the Hurricane Sandy victims, now going on almost a month with power, and in some cases, homes. I also couldn’t help but hear some of the complaints that had to do with homeowner’s insurance. “My homeowner’s insurance said they can give me $150”. Well now, if you live in NY, that probably can’t even get you one night in a hotel, much less put any dent whatsoever in doing something to get there home back. These families have lived in these houses or apartments, paying premiums for a product that has given them no benefit. Is it just me, or is there a huge disconnect between what people think they are buying and what they actually have. I had a similar sales experience where my movers actually used their insurance as a leading factor on why I should hire them. A few broken pieces of (expensive) furniture late, the insurance covered no one, wouldn’t even pay for the tax for the repair, and the people that broke the pieces help no responsibility. Others have probably had similar experiences with auto insurance. From here I am going to make a statement that isn’t based on any studies, but willing to take the risk that it might hold some truth: people do not understand insurance. In my days as a financial advisor, for the beginner, I always advised them to buy life insurance, as it is the most straight forward. You pay a set rate, and you know exactly how much you will get when you die. And the best part is, because there is only one definition of death, the insurance companies can’t argue their way out or try not to pay you. (Some have suicide clauses, or people that lied to get the insurance – however if you were honest, you know exactly what you get when you are approved for life insurance). Critical illness insurance is a well-designed product as well, as it is very clear on defining the benefits – 28 days after being diagnosed with a critical illness (heart attack, cancer or stroke, in most cases), a benefit is paid directly to the survivor. It is when insurance products have a lot of ‘grey’ is when you have to be careful.
People looking for insurance should look for the clear answers on what the product is that they are looking for – if your advisor or bank can’t even give you a straight answer, find a new one. Look for the black and what, and make sure there is a clear definition of when the benefit kicks in. Anyone that has faced a injury on the job, become sick and had to pay for the treatment themselves or paid out-of-pocket for a car accident knows the importance of get an insurance policy that works, and also knows the frustrations of an insurance policy that does not.
Do you have any insurance horror (or heroic) stories? Share them here! What are your tips?