THE MOST COMMON INSURANCE MISTAKES: PART II
Herb Denenberg Column For
Every year American throw away billions
of dollars because of common insurance mistakes. They may buy coverage they
don't need. They may not buy coverage they do need. They may overpay and fail
to collect on legitimate claims. They may grossly overpay for coverage. They
may insure in companies that are financially shaky.
The catalog is endless, but here are some more of the most common
mistakes of consumers in the insurance marketplace.
MISTAKE NUMBER FIVE: Failing to document your property so you can
prove your loss when it occurs. Assume the worst: you have a fire that destroys
your house. Could you remember all of the property in that house and what it
was worth? And could you prove it to some claims adjuster? The Insurance
Information Institute suggests a test: Sit down and from memory try to list all
the property and its value in one of your rooms. You'll learn fast you'd be in
a hopeless situation if you wait till after your property is destroyed and then
try to construct an inventory.
You should make an inventory of your household property, listing
your property in each room. If possible you should also include any appraisals
you have, receipts, and purchase contracts.
You can supplement your inventory with video camera record or
still picture record of each room in your home.
Put your inventory and other records in a safe deposit box or
someplace else where they won't be destroyed in the event of a loss.
Chances are you'll get your claim settled faster and more
satisfactorily if you keep a detailed inventory, says Jeanne Salvatore of the
Insurance Information Institute.
You can get a free booklet explaining all this by calling the
National Insurance Consumer Helpline at 800-942-4242. The booklet is entitled
"The Home Inventory." That hotline is maintained by the Insurance
Information Institute, and is a useful source of insurance information. The III
is an association established by the property and liability insurance industry.
If you have property of high value, such as an expensive diamond
ring, you should have an appraisal by a qualified jeweler. That appraisal
should include a picture of the diamond, a diagram of it showing all inclusions
and other distinctive features of the stone, and a full description of it. An
expert appraiser and jeweler, David Craig of Bucks County (PA), says the key to
proving an insurance claim on a diamond is a good appraisal. Without one,
you're likely to get into a major dispute with the claims adjuster after a
loss.
MISTAKE NUMBER SIX: Buying unnecessary insurance. There's a long
list of policies that don't make sense for most people, but yet are aggressively
marketed and sold. I've noticed that most of the solicitations I get are for
unnecessary, not necessary coverage. Accident insurance probably leads the
list. Most people don't need it. If you die by accident, your dependents don't
need more insurance protection than if you die from a disease. So accident
coverage typically doesn't make sense. It's just a piece of a life insurance
policy, and leaves you unprotected unless you die by accident.
Other unnecessary coverage include, for example, cancer insurance
and other forms of dread disease coverage, life insurance on children, life
insurance on those without dependents, and airline flight insurance and double
indemnity in a life policy (which are other kinds of accident insurance).
MISTAKE NUMBER SEVEN: Neglecting necessary coverage. Perhaps the
most neglected kind of insurance is disability. The marketing of life insurance
is so over-emphasized, with the traditional selling of the wrong kind of
coverage, and coverage to those that don't even need it, that disability often
gets neglected or overlooked altogether.
Disability can sometimes create more catastrophic losses for a
family than even the death of the breadwinner. With disability, especially if
long-term, you not only have loss of income but also huge medical and
maintenance expenses.
Another coverage often neglected is liability. It may be carried
in the homeowners and auto, but it is often carried in inadequate amounts.
Someone may carry only the minimum limits required by the law, but that may be
woefully inadequate. For example, in
One way to solve the problem of inadequate liability limits is to
take out an umbrella policy. It provides protection against lawsuits after your
auto and homeowners policy limits are exhausted. It is
often sold in amounts of one million and up. It does require certain minimum
limits in the underlying auto and homeowners policies. A one million dollar
umbrella costs about $200.
(Herb Denenberg is a former Pennsylvania Insurance Commissioner
and consumer advocate).
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