Not all advice is good advice. Here are some common bits of insurance wisdom that, it turns out, aren't so wise after all.
When you have an insurance claim, the last thing you want to discover is that you didn't buy the right coverage. While it's easy to point the finger at agents, coverage gaps could be a two-way street.
Sometimes friends and family members offer bad advice, including tenuous, illogical and even illegal strategies, hoping to save you a few bucks. But the eventual losses can be huge.
"When people shop for insurance, a lot of times they're looking for the best deal," says Ron Reitz, an independent insurance adjuster and president of Quality Claims Management in San Diego.
We asked some insurance veterans about the bad advice they've heard over the years. Here's what makes them cringe.
Find the best insurance companies
Find the best insurance companies
No. 1: Lock up all insurance policies and other important documents in a safe deposit box
Do not keep your life insurance policy in a safe deposit box. If yours is the only name on the safe deposit box, no one but the executor of your will can get into it without Power of Attorney. If your life insurance policy is locked in there, your beneficiaries will have to wait until the estate is opened by a government entity and an executor is appointed.
If you want the assurance of having important documents locked up, buy a fire-safe box.
"Just make sure documents aren't stored in a place where they can be lost in a flood or fire," says Reitz. With today's technology, there's no excuse not to scan everything and create electronic copies of important papers that can be put on disks or in other storage devices.
No. 2: You don't need flood, earthquake or other disaster insurance
If an earthquake destroys your home, you won't recover a penny unless you have an earthquake insurance policy. The same rule applies to floods.
Decisions about flood insurance should be based on your proximity to a body of water that could overflow, not whether the area flooded before. On the plus side, if you're in a low-risk area, your policy will cost less while still providing the maximum protection.
"Floods occur in all 50 states, and in many cases flood damage happens in areas that aren't high-risk flood zones," explains Peter Moraga, spokesperson for the Insurance Information Network of California.
No. 3: Renter's insurance is a waste of money
Many renters mistakenly assume that their belongings are covered under the landlord's policy. Not the case! If some calamity were to occur, such as a fire, your landlord's insurance won't cover the contents in your apartment, nor will it pay for you to live in a temporary space while your place is uninhabitable, says Amy Bach, executive director of United Policyholders.
If someone is injured while visiting you and sues you, your landlord's insurance won't cover that either.
No. 4: Get the best rate even if you have to lie a little
It might be tempting to fudge the truth on a life insurance application, especially if you have a serious health condition. "Don't do it," advises Steven Modell, president of Modell Brokerage Group in Wayne, Pa. "Not only is it insurance fraud and a felony in most states, but it could prevent your beneficiaries from receiving the death benefit."
No. 5: Base your home insurance policy on the real estate value of your home
Experts recommend setting the structural limit of a home insurance policy on what it would cost to rebuild the home if it were destroyed, not the real estate value. Trouble is, the rebuilding cost is a subjective number.
"Many agents use online tools to estimate the rebuild value, but those tools can be misleading," says Moraga. "It's more important to talk to a contractor and find out what the local costs are for your home's particular type of construction, whether it's in a tract home or custom construction."
No. 6: Set your dwelling limit low
Some insurance agents try to give customers the lowest premium possible in order to close the sale.
"One of the ways they're doing it is by underestimating the value of the dwelling and slapping a 100 percent extended coverage endorsement on the policy," explains Bach. "Most policies have four separate categories of coverage: 1) Dwelling. 2) Contents. 3) Other structures. 4) Additional living expenses. Three of the four pay a percentage of the dwelling, so if you lowball the dwelling value because you have 100 percent extended coverage endorsement, you'll be underinsured for your contents, other structures and additional living expenses."
12 terrible pieces of insurance advice - 1 - - MSN Money money.msn.com/insurance/12-terrible-pieces-of-insurance-advice Aug 8, 2013 - Not all advice is good advice. Here are some common bits of insurance wisdom that, it turns out, aren't so wise after all. - MSN Money Motorcycle Insurance Advice & News - MCN Insurance Advicewww.motorcyclenews.com/MCN/INSURANCE/Advice/Use MCN's insurance advice and MCN Compare to get a great deal on your next insurance quote.Insurance advice for your life - RBC Insurancewww.rbcinsurance.com/insuranceneeds/personal-insurance.htmlVisit RBC Insurance to explore helpful personal insurance advice, resources and tools.Insurance news, comment and advice | Money | The Guardianwww.theguardian.com/money/insuranceLatest news, comment and advice on insurance from the Guardian, the world's leading liberal voice.Car Insurance Advice - British Insurance Brokers' Associationwww.biba.org.uk/InsuranceGuides.aspx?Name=Car-Insurance-AdviceA guide to insurance from BIBA, the British Insurance Brokers Association.Insurance Advice - Life, Auto, Home, Health, Disability, Tips ...insuranceadvice.com/by Walter EdelsteinInsurance Advice. Your source for reliable insurance advice and Tips on life, homeowners, health, auto, dental, long-term care insurance and more.HowStuffWorks "5 Car Insurance Tips"auto.howstuffworks.com/buying-selling/cg-car-insurance-tips.htmThese 5 car insurance tips help you get the right coverage for your money. Read our list of 5 car insurance tips to make sure you choose wisely.Citizens Advice - Insurance - AdviceGuidewww.adviceguide.org.uk › ... › Professional and financial servicesOverview and content list for insurance and insurance policies.Insurance - Money Advice Servicehttps://www.moneyadviceservice.org.uk/en/categories/insuranceThere's more to buying insurance than finding the cheapest quote - make sure you spend your money wisely.Making an insurance claim - Money Advice Servicehttps://www.moneyadviceservice.org.uk/en/.../making-an-insurance-clai...How to claim, what to do if your claim is rejected and how to complain about an insurance company.
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When you have an insurance claim, the last thing you want to discover is that you didn't buy the right coverage. While it's easy to point the finger at agents, coverage gaps could be a two-way street.
Sometimes friends and family members offer bad advice, including tenuous, illogical and even illegal strategies, hoping to save you a few bucks. But the eventual losses can be huge.
"When people shop for insurance, a lot of times they're looking for the best deal," says Ron Reitz, an independent insurance adjuster and president of Quality Claims Management in San Diego.
We asked some insurance veterans about the bad advice they've heard over the years. Here's what makes them cringe.
Find the best insurance companies
Find the best insurance companies
No. 1: Lock up all insurance policies and other important documents in a safe deposit box
Do not keep your life insurance policy in a safe deposit box. If yours is the only name on the safe deposit box, no one but the executor of your will can get into it without Power of Attorney. If your life insurance policy is locked in there, your beneficiaries will have to wait until the estate is opened by a government entity and an executor is appointed.
If you want the assurance of having important documents locked up, buy a fire-safe box.
"Just make sure documents aren't stored in a place where they can be lost in a flood or fire," says Reitz. With today's technology, there's no excuse not to scan everything and create electronic copies of important papers that can be put on disks or in other storage devices.
No. 2: You don't need flood, earthquake or other disaster insurance
If an earthquake destroys your home, you won't recover a penny unless you have an earthquake insurance policy. The same rule applies to floods.
Decisions about flood insurance should be based on your proximity to a body of water that could overflow, not whether the area flooded before. On the plus side, if you're in a low-risk area, your policy will cost less while still providing the maximum protection.
"Floods occur in all 50 states, and in many cases flood damage happens in areas that aren't high-risk flood zones," explains Peter Moraga, spokesperson for the Insurance Information Network of California.
No. 3: Renter's insurance is a waste of money
Many renters mistakenly assume that their belongings are covered under the landlord's policy. Not the case! If some calamity were to occur, such as a fire, your landlord's insurance won't cover the contents in your apartment, nor will it pay for you to live in a temporary space while your place is uninhabitable, says Amy Bach, executive director of United Policyholders.
If someone is injured while visiting you and sues you, your landlord's insurance won't cover that either.
No. 4: Get the best rate even if you have to lie a little
It might be tempting to fudge the truth on a life insurance application, especially if you have a serious health condition. "Don't do it," advises Steven Modell, president of Modell Brokerage Group in Wayne, Pa. "Not only is it insurance fraud and a felony in most states, but it could prevent your beneficiaries from receiving the death benefit."
No. 5: Base your home insurance policy on the real estate value of your home
Experts recommend setting the structural limit of a home insurance policy on what it would cost to rebuild the home if it were destroyed, not the real estate value. Trouble is, the rebuilding cost is a subjective number.
"Many agents use online tools to estimate the rebuild value, but those tools can be misleading," says Moraga. "It's more important to talk to a contractor and find out what the local costs are for your home's particular type of construction, whether it's in a tract home or custom construction."
No. 6: Set your dwelling limit low
Some insurance agents try to give customers the lowest premium possible in order to close the sale.
"One of the ways they're doing it is by underestimating the value of the dwelling and slapping a 100 percent extended coverage endorsement on the policy," explains Bach. "Most policies have four separate categories of coverage: 1) Dwelling. 2) Contents. 3) Other structures. 4) Additional living expenses. Three of the four pay a percentage of the dwelling, so if you lowball the dwelling value because you have 100 percent extended coverage endorsement, you'll be underinsured for your contents, other structures and additional living expenses."
12 terrible pieces of insurance advice - 1 - - MSN Money money.msn.com/insurance/12-terrible-pieces-of-insurance-advice Aug 8, 2013 - Not all advice is good advice. Here are some common bits of insurance wisdom that, it turns out, aren't so wise after all. - MSN Money Motorcycle Insurance Advice & News - MCN Insurance Advicewww.motorcyclenews.com/MCN/INSURANCE/Advice/Use MCN's insurance advice and MCN Compare to get a great deal on your next insurance quote.Insurance advice for your life - RBC Insurancewww.rbcinsurance.com/insuranceneeds/personal-insurance.htmlVisit RBC Insurance to explore helpful personal insurance advice, resources and tools.Insurance news, comment and advice | Money | The Guardianwww.theguardian.com/money/insuranceLatest news, comment and advice on insurance from the Guardian, the world's leading liberal voice.Car Insurance Advice - British Insurance Brokers' Associationwww.biba.org.uk/InsuranceGuides.aspx?Name=Car-Insurance-AdviceA guide to insurance from BIBA, the British Insurance Brokers Association.Insurance Advice - Life, Auto, Home, Health, Disability, Tips ...insuranceadvice.com/by Walter EdelsteinInsurance Advice. Your source for reliable insurance advice and Tips on life, homeowners, health, auto, dental, long-term care insurance and more.HowStuffWorks "5 Car Insurance Tips"auto.howstuffworks.com/buying-selling/cg-car-insurance-tips.htmThese 5 car insurance tips help you get the right coverage for your money. Read our list of 5 car insurance tips to make sure you choose wisely.Citizens Advice - Insurance - AdviceGuidewww.adviceguide.org.uk › ... › Professional and financial servicesOverview and content list for insurance and insurance policies.Insurance - Money Advice Servicehttps://www.moneyadviceservice.org.uk/en/categories/insuranceThere's more to buying insurance than finding the cheapest quote - make sure you spend your money wisely.Making an insurance claim - Money Advice Servicehttps://www.moneyadviceservice.org.uk/en/.../making-an-insurance-clai...How to claim, what to do if your claim is rejected and how to complain about an insurance company.
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