Insurance protects consumers--while also maddening them. Shopping for
the right policy can quite confusing and "consumers are really at a
disadvantage," says J. Robert Hunter, director of insurance at the
Consumer Federation of America. Getting paid for claims is sometimes no
easier: "It has become a war of attrition," says Joseph Ditré, executive
director of Consumers for Affordable Health Care.
Bloomberg.com
consulted consumer advocates, academics, financial advisers, insurance
agents, and adjusters for advice on how to avoid overpaying,
underinsuring, or missing out on claims you deserve to have paid. Click
ahead for tips and tricks of the trade.
Use Buying Guides
Agents are paid by insurers to sell their
products and often sell only certain companies' policies. Some insurers
offering lower prices, such as Geico and USAA, sell directly to the
public. Before meeting an agent, read buying guides on state insurance
regulators' websites, such as California's Insurance Dept. site
to learn what insurance should cost and cover. Ask agents what they
make on a sale, says Karrol Kitt, a professor at the University of Texas
at Austin, and drill down on what policies cover. Ask them to verify
answers with written proof. "Sometimes agents aren't as knowledgeable
as they should be," Kitt says.
Be Wary Of Cheap Policies
Insurance isn't a "commodity like salt or
sugar," says Bill Wilson of the Independent Insurance Agents &
Brokers of America. "There can be a dramatic difference in coverage
from one policy to another." One homeowners policy might cover all
water damage, for example, while another might pay only if you notice
it right away, excluding the effects of a pipe that has caused mold
growth over a long stretch. In health care, coverage and price
differences can be especially dramatic. "The cheapest is rarely the
best," Ditré says.
Raise Your Deductible
"Raising your deductible is the best way to
keep your premiums down," says Amy Bach, executive director of United
Policyholders, a policyholder advocacy group. Even if you can afford the
expensive premiums of a low-deductible policy, it should ultimately
cost less to choose a high-deductible policy and create a bank account
to insure your own small losses. Insurance should be for "catastrophic
losses," says Rutgers University law professor Jay Feinman. For
anything less, "it often makes sense to absorb those yourself."
Get Disaster Coverage
With disasters in the news, the importance of insuring a home against
Mother Nature's bag of tricks is all too clear. Fire insurance won't
necessarily pay out if the fire was caused by an earthquake--unless you
have earthquake insurance. And coverage for hurricane wind damage
might not protect you from the flood caused by the hurricane. (In
Louisiana, only 29 percent of households are covered for floods,
according to its insurance commissioner.) Flood insurance is available
through the federal National Flood Insurance Program for an average of
about $600 per year. On coastal areas and beachfront, coverage can be
far more costly.
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