Studying the insurance fine print
June 15, 2015
Many owners of auto and home insurance don't pick up their contract again after it has been signed. They ensure their monthly payments are made and talk to agents when an accident takes place, but as far as actually reviewing the document they agreed to, it is a rarity. While there is nothing obviously wrong with this practice, ignoring the fine print of a contract can be costly. Doing so can leave some clients without the information they need to know.
Many people are not clear what their auto and home insurance plans cover.
The reminder to examine the agreement on a regular basis comes in the wake of a USA Today article about the dangers of having not enough home insurance. The story states that two-thirds of homeowners are underinsured. The majority of these people will not know what to do or where to turn if something happens to their home.
Reading over the contract can solve that problem. In some ways, knowing the specific details of what an insurance plan covers is almost as important as having a plan itself.
What is hidden in there?
Much of what is covered in the fine print of contacts concerns the amounts of money the insurance company will cover in case of an accident or problem. While it is commonplace to know the deductible on a car in the event of a fender-bender, many insurance customers are unaware of what their plan will pay out in the event a tree falls on their vehicle or a fire starts in the kitchen.
"It is good to know what a plan will cover even if no accident takes place."
Jean Salvatore, a spokeswoman for the Insurance Information Institute, told the New York Times that many people misunderstand the use of insurance. They believe it is to cover “Acts of God,” something out of the owner's control. While that is somewhat true, since things like hail storms and fallen tree branches can be covered, Salvatore said that “most people are surprised" at what “Acts of God" are not brought up in the standard plan: natural disasters like earthquakes and floods.
That exclusion is why reading the fine print is so important, to know specifically what a plan covers. For example, if the closest body of water is miles away, many property owners will have very little or no flood insurance. Yet according to the Federal Emergency Management Agency, a quarter of all flood insurance claims come from people outside high-risk flood zones. In those areas, a $57 annual premium would provide $8,000 in contents coverage.
Making the most of it
After reading over the fine print of home and car insurance contracts, it becomes easier to know what a plan is good for. Not every policy is equal, so learning the ins-and-outs of a plan can be especially valuable.
For example, seeing that collision coverage is included in the auto insurance package is one thing, but knowing specifically what types of collisions are included will come in handy in the event a claim must be filed. Damage to a car from crashing into a lamp post may result in one type of coverage from the insurance company, while hitting another vehicle could be a completely different type of claim, even if they both fall under the collision coverage umbrella.
It is also good to know what a plan will cover even if no accident takes place. Some insurance plans will replace tires that have wear and tear, as a preventative measure before an accident. The same could apply to a home insurance agency giving a customer money back for home repair items like a chimney sweep.