Getting insurance is a no-brainer for a lot of people. What I mean is that most people only think about a few types of insurance when they think about what they really need. 98 percent of people who buy insurance buy the policy that their agent or the person selling the policy tells them to buy.
And about 90% of those people don't know if it really gives them the coverage they need. As a society, we have become too comfortable with the way we buy insurance. Most of us don't find out that we didn't get the right insurance policy for our needs until something bad happens and we need it.
Here's the deal: insurance companies are in business to make money, not to give it away. When you buy insurance, they bet that they will get your premiums for a long time and never have to pay you a dime in claims. This is the insurance company's dream scenario. In the real world, accidents and disasters do happen, and your insurance company knows this better than anyone. And just like the big casinos in Las Vegas, they change the rules of the game so that the odds are in their favour. If you don't think that's true, you should read the exclusions in the fine print of any of the insurance policies you have now.
Companies don't make it easy for you to figure out what a policy says on purpose. Early on in the policy, they write down important points. After that, the grammar of the policy becomes very legalistic. Outlining the many situations and conditions under which your policy will not cover your peril if they are met.
For instance, some auto insurance policies will cover damage to your car caused by a hit-and-run driver as long as the damage was done in a public place like a city street or parking lot. But if the damage happened in a private parking lot or garage, they won't pay for it.
Here's a big one that we just ran into. A woman who owned her own home ran a small online business from her basement, where she sold small items. She bought a computer to keep track of the business, but it caught on fire, which did some minor damage to the house. When the insurance company found out she was running a small business (what they call a "commercial enterprise") from her home, they refused to pay for any of the tens of thousands of dollars worth of damage the computer had caused.
Here's what really makes this story interesting. Six months before the damage, the woman and her husband went to the local insurance agent to increase their coverage so that the office furniture and computer equipment they had bought would be covered. Even the computer and laser printer she would be using for her business had to be covered by a special add-on to the policy. All the information was out in the open and not hidden. The agent knew exactly what the equipment he was insuring was going to be used for and where. But the insurance company was right to not pay the claim because the original policy had a clause that said commercial use was not covered. This clause was more important than any rider that did not specifically cover the property for commercial use.
So, you can see how important it is to know what your policies cover and what they don't. Most of the time, we don't get to see the actual policy until after we've bought it. Sometimes, it takes the company weeks to send us the actual policy in the mail. Sad to say, not many of us ever take the time to read the whole policy we get. Most of the time, the language is too hard to understand, so we put our trust in the agent or company that sold us the policy.
A statement of policy understanding that the agent agrees to and signs as part of the policy could help and is perfectly legal. That is, you, as the person who bought the policy, write down what you think the policy covers based on what the agent told you. Adding a statement of understanding doesn't change or limit a policy that has already been agreed upon. What it does is focus on certain areas of coverage that the policy says are covered. And by saying this, the agent or insurance company agrees with you that these specific things will be covered by the policy that will be given to you.
So, let's say you tell the agent that you will be running a small Internet-based business from your home. Put that in writing. You tell him that your kids have a trampoline in the back yard (trampolines are a big problem, don't get me wrong), and you think that the insurance policy you are buying will cover these risks. Add to the list anything you can think of that might not be obvious in your insurance needs.
Include a statement that your agent is aware of these items and areas of coverage. Have him sign and date it, and then do the same. Put it on the policy and make a copy for your files. Be careful if the agent tells you that you don't need the statement because everything is taken care of. If everything you listed is covered, the agent shouldn't have any reason not to sign it. If the home company thinks that the things you listed are not covered by the policy or are excluded, they will either make a note of it and add riders to your policy, which will cost you more, or they will just deny the policy when it is reviewed. But you are still legally required to have coverage until you get official word one way or the other. You will know where you stand no matter what.
Insurance companies don't like these kinds of tricks, but if more people did them, it would be harder for them to hide exclusions that keep them from having to pay claims.
It's hard to cover every risk we might face in life, but with a little common sense, we can learn to spot things in our own lives that might need special insurance attention.
