Americans have an insurance problem. More specifically, they have the problem of “lack of awareness about their insurance policies”.
Keep these numbers in mind.
According to Lend EDU, 54% of adults in the United States have a life insurance policy, but 33% say they are not sure how the policy works.
Another study by Bend Financial shows that “half of Americans are hopelessly confused with health insurance – so much so that the average American has a D degree of knowledge of their policies.”
Sure, consumer insurance isn’t the most subtle topic at your local hair salon or bar, but when there’s a lot of money on the table—which is the case with most home insurance—it pays to pay attention.
Technology and the insurance industry itself can help bridge that knowledge gap.
“The life insurance coverage gap can largely be attributed to the evolution of consumer digital expectations as well as persistent misperceptions,” said Ladder’s chief actuary, Liam Monaghan.
Getting life insurance the traditional way still takes weeks and even includes fax machines – a major deterrent in the age of everything instant, everything digital. “In recent years, the first digital companies have been stepping in to meet this need – in fact, 74% of Ladder apps are offered on mobile devices,” Monaghan said.
Besides digital transformation, the life insurance industry needs to continue investing in empowering consumers with information as well.
The most common misconceptions consumers have revolve around price, coverage needs, and age. 80% of millennials, for example, overestimate the cost of life insurance and may therefore consider it a luxury they cannot afford.” In addition, 60% of consumers who say they are not interested in purchasing life insurance believe they are covered adequately. through work.”
“This is probably not true, as financial experts recommend getting nearly 10 times your salary in coverage than the usual one or two times through employer benefits programs,” he added.
The Biggest Insurance Mistakes Insurance Professionals Avoid
The truth is that the more you know about consumer insurance, the more money you save and the better your experience in managing the policy.
For help, TheStreet contacted several insurance professionals and asked what they are doing to improve their policy experience — and what average Americans don’t.
Here are the items at the top of their “Avoid Errors” list.
On Medicare. One of the biggest mistakes people make is thinking that they must choose their Medicare plan (or any other health insurance plan) once and renew the same plan each year.
“While this plan may be the most appropriate for you and your family at the time, it may not reflect your ever-changing health and financial situation,” said Ari Parker, lead medical advisor at Chapter. “I always recommend my clients to shop and compare coverage each year.”
For example, you may need to see a doctor for a year longer and require a low tolerance plan. In other years, you may need to reduce expenses and you can follow a higher deduction plan.
The predicament: “I recommend going to an independent Medicare consultant, rather than an insurance company,” Parker said. “Insurance companies only show you their plans, so you lose a lot of options in the market.”
On life insurance. Not adding accidental death passengers to a life insurance policy and living benefits passengers is a common—and crucial—issue with insurance consumers.
The predicament: “These are big mistakes,” said Paramount Quote Insurance founder Timothy Connon. “Buyers should ask about additional passengers when shopping for insurance to make coverage better than it already is.”
The accidental rider can double the policy face amount if death occurs due to an accident and the living benefits rider will allow the insured to use money from a life insurance policy if they become terminally ill to help pay for things while they are alive.
“However, most consumers never ask about these types of riders,” Konon said.
on homeowner policies. Another mistake consumers make that insurance professionals don’t make is adding their property trust to their homeowner’s policy.
stalemate. If you own your home in a trust or LLC, this entity must be included in the homeowner’s policy if there is a wide liability or claim.
Scott W. Johnson, founder of Marindependent Insurances Services, stated, “Insurance companies are not legally obligated to defend entities that are not listed as insured or that can be defined as insured under policy documents.”
On not shopping for good policy. Another big mistake common to the consumer is to go with someone they know or trust instead of shopping in the market.
“Just because a State Farm agent is on the street doesn’t mean it’s the right product for you,” said Kelly Maxwell, founder of Seniors Mutual. “This includes all types of insurance, not just life and health insurance, which is what we focus on.”
stalemate. There are many insurance agencies nowadays for all types of insurance that will shop for you in the market and you will find not only the best rates but the greatest benefits.
“The history of the insurance industry is not so kind to transparency, but recent technology in the past five to 10 years has made this possible,” Maxwell said. “You can go online and compare 15+ companies with any type of insurance to save hundreds or even thousands annually.”
“I personally did it in my home and car recently this year,” Maxwell added.
on your insurance company relationships. Too many insurance consumers fail to broaden their horizons when choosing an insurance company.
The predicament: Konon advised working with an insurance broker, not with a captive agent or any agents representing just one company.
“Make sure you work with a life insurance broker who has multiple contracts with the best companies to get you the best rate,” he said. “Also be sure to ask about the additional passengers available for life insurance policies.”