Julian Crowley
When you take out insurance, you might be under the impression that your monthly premium means that you needn’t worry about accidents, bad luck, or unforeseen circumstances. After all, that’s what your insurance is there to protect you from, right? Unfortunately, the truth is, insurance companies will do whatever they can to wriggle out of their responsibilities and rip you off with high rates, stonewalling tactics and anything else they can muster in order to take your money without giving you anything in return.
10. Car Insurance – “Low-Ball Offers”
When your vehicle is a total loss, your policy may cover a replacement or the cash value of an equivalent car. Car insurance companies make a habit of low-balling their cash offer, understating the car’s condition with imaginary quibbles about paint chips and dings. Worse than this, they will estimate the value of your car by using a “comparable” vehicle — with thousands more miles on the clock. The National Association of Dealers in America maintains that low mileage is a significant factor in a car’s value, but it seems the insurance companies would rather ignore this fact and simply rip you off.
9. Car Insurance – High Rates, Low Deductible
Insurance brokers and companies will often push you towards a policy with a low deductible, maintaining that you’ll find yourself less out of pocket should an accident occur. Of course, they don’t tell you the math, which makes it obvious that all but the worst drivers would be better off with a higher deductible. A $100 a month policy might mean that you’ll “only” have to pay $250 for one accident, but a $50 a month policy that means you’ll pay $1000 for an accident actually leaves you $450 better off, assuming you only have one accident a year, but of course the insurance companies don’t tell you this…
8. Car Insurance – Renewal Price Rises
Insurance companies rely on your sense of inertia. When the time comes for renewal each year they will often try to slip in a price rise and hope that you don’t notice — and they’re certainly not going to make it obvious. An introductory offer that’s too good to be true may well be followed by a price-hike and little to no explanation of what you’ve done to warrant an increase in your premiums. Take heed.
7. Travel Insurance You Don’t Need
Americans spend over $1bn a year on travel insurance, often sneakily included in the final bill for the holiday. While travel agents will give you the hard sell about the horrors of lost luggage and cancelled flights, what they won’t tell you is that you may already be covered by homeowners’ insurance on your credit cards, or legal obligations on the part of your airline. Your agent will also probably have a good deal going with a particular provider and will steer you towards the insurance deal that’s best for them, all the while pretending to be concerned about your welfare.
6. Title Insurance Kick-Backs
Title insurance is definitely a must-have for homebuyers, but it’s almost never a good idea to listen to the advice of your broker. They’re in it for themselves, not to get the best deal for you, and will no doubt direct you to a title company with whom they have a relationship. They certainly won’t tell you that the company used by the last owner will probably offer a better rate as they already know the property. Brokers use your need for title insurance to try to pressure you into moving fast, when you should really be shopping around.
5. Life Insurance Settlements
You might decide you want to sell off your life insurance policy for some ready cash. You might think that commission means that your broker will want to get you the best settlement payment, but their income isn’t based on the deal they get for you — instead it’s solely connected to the actual value of the policy. They have no incentive whatsoever to get you a good deal, and may be working behind the scenes to keep their buyers happy.
4. Home Insurance – Flood vs. Wind
After Katrina, the last thing Louisiana and Mississippi residents needed was rip-offs from insurers. But when homeowners with homeowners’ insurance policies tried to collect on damage caused by wind, the insurance companies did their best to try and characterize everything as water damage from flooding, as this normally isn’t covered by those policies. Lawsuits allege that insurance companies deliberately exaggerated flood damage so that US taxpayers would have to foot the bill. What’s more, it is alleged that insurance companies encouraged their employees to underestimate repair costs so that they wouldn’t have to pay out their full liabilities.
3. Health Insurance Billing
Medical bills are the leading cause of bankruptcy in the US, so those with good insurance breathe a sigh of relief when they feel confident that they have their needs covered. Of course, after the hospital visit the problems start. When insurance companies and health service providers disagree over the validity of claims, the consumer gets stuck in the middle, and insurance companies certainly don’t make them feel at ease. You may even end up paying a bill that you shouldn’t have to, just to get the threat of a bad credit score to go away.
2. Whole Life Insurance “Investment”
Whole life insurance is often pushed by brokers because it can be characterized as an investment. Of course, if you simply got a term life insurance policy for much cheaper and invested your extra cash you would likely end up with an investment worth twice as much. So why aren’t you made aware of the fact that this may not be the best option? Simple: insurance companies want to rip you off and so offer insanely high commissions to agents who can sell whole life insurance policies.
1. Health Insurance – “Reasonable and Customary Rates”
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Visiting an out-of-network doctor means that your insurance company will generally pay a proportion, not of your bill, but a percentage of what they feel is a “reasonable and customary rate” for doctors in that area. Of course, consumers never seem to find that rate themselves. In fact, the New York State Attorney General Andrew Cuomo and the American Medical Association have filed suits against insurers alleging that the data on which they assess “reasonable and customary” is manipulated to save the insurers money and pass the cost on to consumers. The suits allege everything from eliminating high charges, to combining high and low-cost areas in databases to dilute the former, all of which means that “reasonable and customary” is in fact extortionate and highly unusual!
