Have you been ripped off by insurance? Many people think insurance is a rip off. After all, you pay a lot of money for something you hope you will never use. Many homeowners pay their whole life for homeowners insurance, and never have a claim. However, these homeowners did not pay for nothing, because they had the protection provided by their homeowners insurance, even though it turned out they never had to use it.

Was all the money in premium paid by people never having a claim wasted? No, because the personal & financial consequences of having your house burn down is so devastating, it is worth it to give up some of your money, in the form of insurance premiums, to have the protection, even though most people’s homes do not burn down.

Rip-off: A product or service that is
overpriced or of poor quality.

But it is hard for someone, paying for homeowners insurance every year, for the last 30 years, and never having a claim, to not feel like they have paid for nothing, and they were ripped off.

Yet, house fires are not a remote possibility, unlike being hit in the head by a piece of falling space debris. For those people having house fires, having homeowners insurance, choosing the proper coverage, and insuring with a good insurance company, are some of the best & most important decisions they may make.

Some people feel ripped off by insurance because they pay too much, or their claim was not covered or paid as they expected. Paying too much, & not having the insurance coverage you need, are insurance rip offs you can avoid by shopping for the best price, understanding your coverage options, deciding what insurance coverage you need, and knowing how your insurance works.

This blog entry is the first in a series of blog posts, to help you avoid mistakes many people make with their insurance, leading them to feel ripped off, either by the price they pay, or by not having the coverage they need when they have a claim.

Here is the first rule of avoiding the insurance rip off:

1. When buying insurance, have the insurance company or agent explain each coverage — know all coverage options available, how they work, and their cost.

Few people get excited about buying insurance. Most people find it complicated and boring. Shopping for insurance is not fun, unlike test driving a sporty new car you want to buy.

A lot of people take no interest in their coverage, thinking they will be covered as they expect to be covered by simply having insurance, such as auto insurance, particularly if they ask for “full coverage” auto insurance.
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If you buy homeowners insurance, you are covered for anything happening to your house causing a major expense, right? WRONG! Homeowners insurance policies have many limitations on coverage and exclusions.

Okay, so you buy homeowners insurance, but the insurance company excludes a lot of things to avoid having to pay a claim? What a rip off!

No, there are reasons for the exclusions & limitations in homeowners insurance policies, and the cost of homeowners insurance is lower because of them.

Flood damage to your home is not covered by homeowners insurance, but the costs of damage from floods are not used to determine your homeowners insurance rate because of the exclusion.

Earthquake damage is also excluded from homeowners insurance, because homeowners with almost no risk of earthquake damage do not want pay the higher rates to have protection for something they are extremely unlikely to need. But some insurance companies allow homeowners concerned with earthquake damage to their home to purchase extra coverage to insure for earthquake damage.

This is why it is important to know your coverage options, so you can cater your insurance coverage to your needs.

For example, if you work from home, have a package related to your business delivered to your residence, and the delivery man slips, injures himself on your property, and sues you, the cost of defense or any liability for the injury is not covered by the basic homeowners insurance policy.

However, many insurance companies will cover liability & the cost of defense for injury resulting from a business pursuit (like the example above) for an additional premium, usually under $30 a year. If your claim was declined because you did not have this inexpensive additional coverage, wouldn’t you feel ripped off?

Not too long ago, I shopped my auto insurance, and an agent gave me a price for his company. He did not ask me about what coverage I needed before giving me the price. I asked about the coverage, after he gave me the price, and he quoted me less liability, and higher deductibles than I have now. If I liked the price, I could have purchased an auto insurance policy with much less coverage than I have now. I would have been very upset to find out I had an $1,000 deductible if my car was damaged by hitting a tree, or from being vandalized.

If you want to accurately compare prices when you shop for insurance, make sure the agents & insurance companies quoting you, quote the same coverage. But before you buy, have the insurance company or agent review all your coverage options, so you can make sure you have the protection you need. It will be too late, once you have had a claim, to find out you had the wrong coverage.

Have you felt ripped off by an auto or home insurance company? Tell me about it. Comment on my facebook page. Follow me on Twitter for important insurance consumer news and new blog entries at CarInsWatch. Read auto & home insurance company reviews for over 40 different companies, rating each company’s pricing, claims handling and customer service, at smartshopyourcarinsurance.com.