My Personal Finance Blog

Just in case you do claim, the policy includes every possible way of avoiding payment on the claim. So all the headlines in the quotes and on the front page of the policy sell you the idea of coverage. All the small print later in the policy limits and excludes the insurer’s liability to pay. It should all be so straightforward. The policy is a simple contract between you and the insurer. You pay a premium. If any of the following things happen to you, the insurer pays for your treatment. You look down the list of injuries, diseases and disorders. Ah, if only life could be so simple.

The first problem is who you want to treat you. Some people are happy to have anyone with MD after their name prod them, nod wisely and write out a prescription. Others will only accept someone with experience in the particular problem. The difference between the two can be thousands of dollars. The doctor in general practice will charge only a small fee for a quick consult. If you go to the nearest specialist and you are put through a battery of tests to confirm the diagnosis, the total bill for the same prescription could be relatively astronomical. Then we come to the question of the treatments. The quick solution is usually a drug but taking, say, a painkiller when what you actually need is surgery to relieve the physical cause of the pain. . . Well, if you want a cure and avoid dependence on the painkillers, your insurer must be prepared to pay a lot more money.

The problem with medicine is the uncertainty. Science has only progressed so far, identifying many possible diseases and disorders, but never being totally sure what the best treatment is. One of the current hit TV medical dramas is “House” where the problems of diagnosis are presented as entertainment. What the program fails to tell you is how much the hospital would bill Gregory House’s patients. All it does is show you the alarming number of very expensive tests you could be asked to pay for without any guarantee they will provide the definite answer. So, when you get health insurance quotes, try to get a feel for three key areas: what diseases and disorders are covered, who is allowed to treat you, and what are the limits on the treatments? Yes, there will be jargon, but never accept health insurance quotes at face value. Always try to get answers to these three simple questions. Most plans place real limits of your freedom of choice. In fact, the lower the premium, the less choice you will be allowed. Only the top-of-the-range plans leave you with a reasonable amount of control over what happens to you and your family. This leaves us with an irony. The rich who have least need for health insurance are actually able to buy the best terms. The poor cannot pay and are not covered. The rest scrape the barrel to get what treatment they can.

When you are looking around for a house to buy, the cost of home insurance is not always the most important thought on your mind. Even if you do think about it, the most common consideration is the state of repair and how easy it would be to repair or rebuild should there be a fire. This confidence continues when buying the insurance policy. You sign up for an all-perils policy and take the words at face value. If you are insured against all perils, that surely means you can sleep peacefully at night. Except that confidence is too often misplaced. Looking around the US right now, it’s one of the coldest winters on record with heavier snow fall than usual. When the weather warms, the melting snow will flood into the rivers… That’s a joy to come. So let’s list the most common events that damage your home: landslides, subsidence, floods, hurricanes and tornadoes. Live in the wrong states and we add earthquakes. Now take out your policy and check that exclusion clause. You will see some mysterious phrases like “surface water”. That excludes every possible source of water no matter whether it comes in as a high tide, wind surge, rain or local sewage drains backing up. When you add up everything not included, even the top-of-the-range policies from the supposedly best insurers often end up as covering rebuilding costs from fire and wind only – that’s wind and not tornadoes or hurricanes.

To protect yourself, you need to start early in the buying process. Start with simple questions: has there been any accidents in this area? Is there a heavy clay content in the soil? Is this an earthquake zone? If the answer to any of these questions is yes, you should get a geology report before going any further. Mining subsidence is a real problem in some areas. Soil that expands when wet and contracts when dry can wreck the foundations of your home – the Department of Agriculture estimates that up to 25% of properties in the US are at risk of damage. We all know about earthquakes. If your proposed property is on a slope, what’s the risk of a landslide or rock fall? When we move on to flood risks, every community is at risk – check out the addresses of potential properties through http://www.floodsmart.gov/ which is run by Homeland Security’s FEMA. It also gives you estimates of the likely premiums for areas at higher risk.

Obviously it’s not possible to avoid every peril. Because of work, family and other commitments, we cannot all choose where to live. But, if you have good information about the weather patterns and geology of your area, you can get quotes for named perils homeowners insurance. If there are policies available, this will give you real protection against the named threats, whether earthquake, flooding, subsidence, landslides, hurricanes, and so on. When you have the quoted premiums in front of you, the decision whether to buy becomes more clear cut. If you already know the insurance industry will not sell you a policy, you can decide to look in a different area. This is not to raise homeowners insurance to a make-or-break level, but if the annual costs of living in a hazardous area are going to strain your family budget, this is something you should consider carefully before buying. If you already have such a home, you can have named perils added to your existing homeowners insurance. Hopefully, you can afford the additional premiums.