With billions of people on the planet, all with their own thoughts and ideas, it is not uncommon to find that the advice passed to you from “those in the know” can actually be some of the worst suggestions you can receive. This can certainly be seen in some of the most terrible, and common, insurance advice seemingly passed down from knowledgeable people.
Common insurance blunders often deal with protecting the insurance policy or with saving money on purchasing insurance. Many abysmal pieces of advice regarding insurance have been passed on from generation to generation and laterally across peers of the same age group and all of them have led many to wish they had not listened to their amateur insurance expert next door.
One of the most common horrible pieces of advice that many people receive concerning insurance is that they should base their home insurance policy on the real estate value of the home. Not only is this one of the most repeated bad pieces of insurance advice, it is also one of the most divulged or enacted terrible tips.
Protect Your Home
The thinking or rational for this faulty tip sounds logical, the main idea being that one should insure their home for the same cost it would take to rebuild it. But what does not get told is that basing one’s homeowners insurance on the real estate value of the home will typically lead to different costs should the home ever actually need to be completely rebuilt.
That is because the real estate value of the home is typically lower than the construction costs it would take to completely restore or rebuild the home. For this reason, the better piece of advice for knowing how much to insure a home would be to talk with local construction companies, maybe even the company that build the home in the first place, and consult with them on the price tag it would take to totally rebuild the home and then set the homeowners insurance based on that number and not the real estate value of the home.
Lying to Get a Better Rate
Another common but potentially very harmful piece of insurance advice that one should never take is to lie a little on the insurance application to get a better rate. Those with preexisting conditions have traditionally be more prone to this risky piece of advice, but even those with seemingly nothing to hide from the insurance companies have been known to indulge in telling little white lies on their insurance application forms.
This is a terrible piece of advice all around. Not only is lying on an application form considered insurance fraud, which is a felony offense in most instances, it also can limit the effectiveness of the policy because it could prevent beneficiaries from receiving their benefits.
Don’t Hide Your Insurance Plan
Another common but misleading piece of insurance advice that can lead to beneficiaries not receiving the benefits of the insurance policy is the often suggested but foolish advice to have one’s insurance policies locked up in a safety deposit box somewhere. While this may sound like a good idea to some, if one thinks through the possible scenarios, one can see that locking all of the insurance policies into a safety deposit box can be an unstable and perhaps even damaging plan.
As an example, one should think through this scenario. If a person puts, say, their life insurance policy into a safety deposit box than only that person whose name is one the safety deposit box will be able to have access to the box.
This means that beneficiaries to the life insurance policy will have to wait until an executor of the will has been appointed by the state before they can gain access to the safety deposit box and the valuable life insurance policy within. If one still feels that a safety deposit box is the safest place for their insurance policies and other important documents, then they should pre appoint an executor to their will who will be able to legally open the box in the event of the policy holders death, have the safety deposit box co-singed with a spouse or trusted loved one, or simply purchase their own fire safe to be kept in their home or similar location which can house the important documents.
These and other seemingly sound pieces of advice on insurance given out by those who think they know to others can often be misleading and potential dangerous, both legally and financially, to those who accept them. For this reason, those who wish to learn more about how to properly handle their insurance policies should seek the counsel of honest insurance professionals.