Why Insurance Does Not Have To Be Complicated


Tim Barnes, CLU
Tim Barnes, CLU

Yesterday, I read another article defending the role of insurance agents/advisors.

Please do not misunderstand me.  I am proud to have been an insurance agent since 1987.  The insurance industry has been good to me and my family.  It has allowed me to keep my mind busy and pay my bills on time.  I really cannot ask for much more.

There is no question that insurance is complicated.  However, in this post I want to share some ideas that, if you will implement them, will help make it less complicated for you.

USE THE CORRECT TYPE OF ADVISOR

It is true that the amount of information that insurance professionals must understand and maintain is vast and complicated.  I honestly do not see how some insurance agents are able to keep up with everything for both Property and Casualty insurance and Life & Health insurance.  They are drastically different and the laws for both keep changing every time the TX legislature meets or someone in D.C. gets bored.

I find that it consumes enough time just keeping up with changes in health insurance.  I surrendered my license to work with Property and Casualty insurance when I became an independent insurance agent.  I quickly found out that without a home office that I could consult about anything that was not routine, I was not able to give my clients the quality of advice they were looking for.

In my opinion, an insurance agent should either try to keep up with the laws to insure a person’s car or health.

However, in most circumstances, you do not need to know everything about all insurance plans.  When you shop for insurance, you have a general idea of what you want.

There is no need for you to understand the difference between insurance for a boiler and insurance for your jewelry if you are looking for health insurance. That is a job best left to your insurance professional.

When you are in the market for a certain type of insurance, use an insurance agent who is trained in that area of insurance.

AVOID INSURANCE JARGON

Like most professionals, insurance agents have a specific jargon.  Most of us understand the difference between a guaranteed renewable policy and a conditionally renewable policy.   We understand what it means when someone says, “An insurance policy is an aleatory, unilateral contract of adhesion.”

Those terms, and many others, are unintelligible for many people.  Unless you are a current, or former, insurance agent, there is a good chance that you do not understand the sentence above.  If you do, give yourself a gold star.

There are ways to express the same concepts in everyday English, without having to confuse people with “jargon.”

When a policy is “guaranteed renewable” only the premium can change.  As long as the premium is paid, the insurance company cannot change anything.  This principle is most important when I am working with people enrolled in Medicare.  Medigap and traditional Long Term Care insurance policies are Guaranteed Renewable.

Conditionally renewable policies are different.  Not only can insurance companies change the premiums they require, they can also change what is covered.  Medicare Advantage and Medicare D plans are Conditionally Renewable.  That is why I advise all my clients with Medicare Advantage and Medicare D plans to review the letters they get in September or October to see if any changes were made to their plans for the next year.

The sentence, “An insurance policy is an aleatory, unilateral contract of adhesion.” means that an insurance policy is written by the insurance company (aleatory), only obligates the insurance company (unilateral) and you must be given time to inspect the contract before you are committed to it (adhesion).

The problem with jargon is that many insurance agents use it to make insurance sound more complex than it is.  If you can eliminate the unfamiliar words from the conversation, your buying experience will be much easier.

If you have elected to use the services of an insurance professional, hopefully he will not use insurance jargon.  However, be aware that he is exposed to insurance specific vocabulary every day.  If he slips up and accidentally uses a term that you do not understand, stop him immediately and have him translate.  You should be able to understand everything about the insurance you buy.

After all, it is you, and not the insurance agent who is going to be paying the premium.  You deserve to know what your money is buying for you and your family.

DO YOUR HOMEWORK

Your insurance agent knows a great deal about many things.  As a Life & Health insurance agent, I am required to know about Life, Disability, Major Medical, Accident, Hospital Indemnity, Dental and Critical Illness insurance.  I am also certified to help with Long Term Care and Medicare products.

I am required to understand how all of those policies work, what the underwriting rules are for them and how they interact with each other.

For example, under Obamacare, medical underwriting is not allowed for Major Medical and pediatric Dental health insurance but it is allowed for all other types of health insurance.

When you elect to shop for insurance, make certain that you know exactly what you want to insure and how much you are willing to pay.

If you know those two pieces of information, you will not be easily tricked into buying more insurance than you need.

Just be aware that many Americans do not understand the actual cost of insurance.  Many Americans tend to over-estimate the cost of insurance.  Don’t be too surprised if you find that the cost of insurance is actually lower than you anticipated.

However, with all the talk about “affordable care” during the past 5 years, the truth is that the cost of Major Medical insurance has increased in 2014 more than was expected, unless you qualify for a federal tax credit.  Don’t be too surprised if you learn that the cost of health insurance is more than what you anticipated.

The politicians in D.C., who have no experience in insurance, have added so many new taxes, fees and benefits to Major Medical policies that the premiums in 2014 do not even come close to what people were paying for Major Medical insurance in 2013.

If you underestimate the cost for Major Medical insurance, remain flexible.  A good insurance agent should be able to help you understand why you are going to have to pay more for your health insurance in 2014 than you did in 2013 if you are not eligible for a federal “subsidy”.

SUMMARY

When it is time for you to shop for insurance, remember to choose an insurance agent who understands the rules for the type of insurance you want, is able to translate insurance terms into language you understand and make certain that you know exactly what you want and have an idea of how much you will spend for it before you even contact an insurance professional.

Help Wanted

 

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