American Money

There’s a new, expensive, and rather useless phenomenon in the insurance industry- Non-insurance companies offering insurance to consumers. This insurance, despite appearances, is real insurance. The trouble is that it’s extremely low grade insurance. If you bought home insurance like that, you’d have very low, and usually hopelessly inadequate, cover for your home.

Some of this insurance is travel insurance, but these tacky little policies show up in other areas, too. One of the less impressive, and arguably worst, types of insurance is very like the old “newspaper” insurance, where newspapers were offering life insurance to consumers.

These policies vary a lot in quality. Some, to be fair, are offered by bona fide insurance companies. That’s about the only thing they’ve got going for them, and it’s not much. They’re the El Cheapo versions of normal consumer policies, and they will pay out on claims. It’s just that they’ll also pay out very low, and well below market rates for decent policies.

The telltale signs of lousy insurance

The signs are pretty obvious, but it’s easy to be persuaded by good ad copy that you’re getting some sort of bargain. You aren’t. You’re being sold a product you may not even want, as part of a package deal. You will be paying more, in any case.

The signs are:

• Insurance products tacked on to other commercial products. This is the equivalent of a free set of steak knives. The fact that these products are offered by companies which aren’t even insurance companies is also a definite recommendation to avoid these policies.
• Any mention of “Super low rates of insurance”. The only way to get super low rates of insurance is to get insurance policies that don’t do very much, don’t pay out very much, and are covered in exclusion clauses and terms defining what they won’t cover.
• Very small amounts of cover. This is about as close to a definition of “worthless” as you can get in any form of insurance. Exactly how far will $200 worth of cover go? You may be able to buy a dinner with it, but not replace whatever the policy claimed to be covering.

There are many variations on these themes, but those are the basics.

What to do when asked “Do you want insurance with that?”

Briefly, the answer to that question is to run as far and as fast as you can away from the offer. There’s another issue, however. If the offer comes from some firm with which you regularly do business, you may want to reconsider doing any more business with that company. These very shoddy “insurance” offers aren’t a good sign. Nobody who knows anything about insurance would touch them on a bet. You wouldn’t buy building insurance from a grocery. You shouldn’t buy insurance from anyone but real insurers.

If you want insurance, talk to the professionals in the insurance industry, not the sales team from your local newspaper, airline or other industries. Know your rights, know your insurance company, and stay well away from scams like these.