Monday, September 27, 2010

Sept. 28: Ask a Stupid Question Day

By Amy Danise,
Last updated Sept. 27, 2010

Flipping through my “funny holidays” calendar, I discovered that Sept. 28 is “Ask a Stupid Question Day.” Why is there only one day for that?! We love receiving questions from readers every day – and we don’t consider any of them stupid. As Bob Passmore of the Property Casualty Insurers Association puts it, “I was always taught that the only stupid question was the one you didn't ask.” There’s no doubt this holds true for insurance – and what better way to learn a little something than by asking a “stupid” question.

So we asked a variety of experts in the insurance industry: “What’s the most stupid question you’ve ever heard about insurance?”

Is this covered?

“If you aren't sure if you have the coverage you want, ask your agent before you have a loss -- don't assume that something is covered,” advises Passmore. Why pay for insurance you don’t use because you don’t understand it?

Should I file a claim that’s only a little more than my deductible?

Let’s say you have damage to your house that will cost about $3,000 to repair, and your home insurance deductible is $2,500. Should you file a claim?

“I then ask why they would want to make a claim for $500 – or less,” says Ron Reitz, president of Quality Claims Management in San Diego, which provides public insurance adjuster services to consumers. Filing claims eventually leads to insurance rate increases. “I do not recommend filing small claims,” says Reitz. “I think insurance should be for the larger claims.”

This reveals an insurance truth that’s hard to swallow: You should pay for insurance and avoid actually using it – except in cases of major damage. Filing a claim that nets you $500 after your deductible is not worth potentially paying hundreds more in premiums over subsequent years after you’re pegged as a “risky” customer.

Will insurance pay for my illegal activities?

Amy Bach of United Policyholders, a nonprofit consumer-rights organization, recalls people asking whether they can make insurance claims for damage to illegal items, or whether they can make insurance claims for lost income that they never reported on their tax returns.

The answer: Maybe! Insurance sometimes pays for damage due to illegal acts.

Isn’t a vicious dog a great way to keep burglars from entering your home?

“No, having a vicious dog can injure innocent people. It can also lead to a lawsuit,” points out Loretta Worters, vice president of the Insurance Information Institute. “The best deterrent is to have a burglar alarm system installed in your home.”

Here’s another indication that a vicious dog isn’t a good idea: Your home insurance rates could go through the roof, or your insurer could refuse to cover you, period. It doesn’t want the risk of an expensive dog-bite claim.

Why do I need life insurance?

“Lots of people have fuzzy ideas that they should get coverage but, because life insurance involves mortality, fail to address the issue properly. Indeed, who really wants to think much of their own mortality?” says Jack Dolan of the American Council of Life Insurers.

But asking “Why do I need life insurance” is often the same question as, “Does my family really need my income?”

“When they understand why it's needed and how inexpensive it can be, they're easily convinced,” says Dolan.

What’s your stupid question?

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