Buyer beware; 7; If I Die

Buyer beware. The past and present by word of the bewildered consumer shoppers in the modern marketplace look for the Best Buy the safest product and find a perplexing jumble of good news. The consumer's choice is the story behind this program series buyer beware. Many expenses in the family budget result in the acquisition of physical goods. Money spent on an automobile or new carpeting clearly reveals the bartering power of dollars and cents. But consumers also pay for intangible items which may never result in economic benefit. What items are these. Insurance policies. The fine print of these documents may not always bring financial gain but it does provide a sense of economic security in the face of disaster. However most people might prefer to lose every cent of insurance premiums. Rather than face a catastrophic claim

still accidents do happen and few bank accounts can handle such hardships. So consumers develop a portfolio of insurance policies. Let's see how one newly married couple made these choices and listen to the advice of experts in the field of insurance. Betsy and George Bates live in a small Illinois community. George works at the air base nearby and betsy does typing for the Town Clerk. The dates are about to buy a small home in a newly developed area. They have two cars so that they can each travel to and from work one evening after dinner. They decide it's time to talk with their insurance agent. Campbell Evans associate professor of finance and insurance at Illinois Wesleyan University and independent insurance agent answers their questions. Now you sit here on the patio and and I'll pour some iced tea for you both. Thanks it's

really been a scorcher and I think it really has you know Mr. Evans I think would really like to do first of all is get the picture straight just what type of insurance do you think is most important to us now. There are three forms of insurance that you will probably be interested in. The homeowners form which code words here are property. The automobile policy that will cover your automobile exposure and then some form of. Life insurance. Perhaps you also would be interested in hospitalization insurance but this may be provided to you by. One of your employers. Well let's talk about automobile insurance first Nancy and I both have cars. I like to keep the costs of policies on them both fairly low. What then should we do to get the best policy available. You really are not in a great bargaining position on automobile insurance now because most of the companies nationwide who have been writing

automobile insurance have been losing money. None of them underwrite automobile insurance freely. They all require you to have a reasonably good record to qualify for a preferred rate. You will certainly be able to choose your own limits of liability that is how much liability insurance that you want and the additional cost of higher limits of liability is in consequential compared to the base limits. So you may want to consider $50000 or perhaps $100000 labial what the insurance limits you will have some show I says to medical payments which is coverage for each person including yourself in your own automobile who might be injured. You can buy anywhere from two hundred fifty dollars per person to $5000 per person there. The comprehensive coverage

that covers all losses except collision that is fire theft when a storm glass breakage tree damage or whatever happens to your car except collision is offered on a full coverage basis for the actual cash value of the car are on a $50 deductible basis. Then the collision is most generally offered on a $50 deductible basis are a hundred dollar deductible basis. Automobile Insurance has received particularly critical study by many consumer advocates they have considered the alternatives described by Mr. Evans and then analyzed the basic system of such insurance. One critic professor Jeffrey O'Connell of the College of Law at the University of Illinois in our band has worked closely with Professor Robert E. Keaton of the Harvard Law School to devise a new proposal for such policies. Professor O'Connell outlines

their plan and the president ills it could cure. Well the basic problem with automobile insurance today is that you can be paid only by making a claim against someone else's insurance company which doesn't owe any loyalty to you. You're not the customer of that company and you make it on the basis that you were free from fault and the other driver was at fault when of course it's very often difficult to avoid an accident. And it's very often to know who was at fault after an accident has occurred. And thirdly you make a claim not only for your out-of-pocket loss your medical expenses let's say in your wage loss which are relatively easy to ascertain in most cases. But you also make a claim for the monetary value of your pain and suffering. Which is of course very hard to measure in dollars and cents the result is the traffic claims today can be dominated by attitudes of distrust and hostility that accompany a lawsuit between adversary parties. The proposal of Professor Robert Keeton of the Harvard Law School and I have made would make automobile insurance much more like fire insurance whereby your own

insurance company would pay you on the happening and happening of an accident regardless of who was at fault in the accident today for example if you are careless with a match or a cigarette in your house your couch burns and your fire insurance company will pay you regardless of the fact that you were careless they won't pay you if you intentionally burn your house down or burn property but that of course is a very rare instance. And we feel that by having your own insurance company pay you for your out-of-pocket loss we would make pain and suffering coverage for instance optional you could buy it if you wanted we think when most people find what it costs they won't want it anymore. But at least we'd make it optional. We think however that if we make insurance payable by your own insurance company without regard to fault for your out-of-pocket loss we will do away with the high costs that plague today's system with the terrible delays that plague today's system for example a recent study shows that the average automobile claim under the liability system which I've been discussing takes 15 months or more.

The average claim on a non fault coverage takes a matter of weeks. Still this plan has not been adopted by ANY STATE OF THE UNION. Consumers are faced with a choice of policies as they stand now. Professor O'Connell counsels the insurance shopper for the moment. There are supplementary coverages which are available on a non-formal basis. You can buy for instance so-called medical payments coverage whereby your own company will pay you for your medical expenses up to $5000. You can buy a so-called collision insurance whereby your own company will pay you for damage to your car regardless of who was at fault and the accident and you can buy comprehensive coverage which pays for damage to your car other than through a collision say fire or theft or something of that nature. And I think it makes sense to buy these things. Obviously though they entail expense. You're talking about. You see now two coverages. You have your coverage covering your liability to someone else and you have other coverages which cover your own losses and that obviously entailed extra expense and that's one of

the things we would like to eliminate. But obviously that's something that you have to live with at least for the present. I think it also makes sense for example to buy deductibles when you buy any form of insurance on yourself if you can. Deductible really means that you agree that unless the loss exceeds a certain amount it's a fifty or a hundred dollars you will pay for that loss and indeed when it exceeds that amount you will still pay for that smaller loss. The advantage of a deductible is that it takes a lot of money to crank up the insurance mechanism. And therefore the insurer if he can know that it's not to have to bother with small claims in your case they can sell you the insurance for really a very substantial savings and you want to look into deductables and you ought to look into the largest possible deductible that you think you can bear comfortably. $50 is available some people really would find themselves badly strapped if they had to pay more than $50 saved for the repair of their car at one time. But if you think you could handle that you could have a hundred dollars if you could handle two hundred fifty dollars. You're probably better advised In other words it's a better

insurance buy the bigger deductible you get and then you're buying the protection you see for the truly serious or almost catastrophic occurrence which otherwise would would wipe you out or at least wipe out a great deal of your savings. Professor O'Connell also suggests attention to specifics in comparing various insurance companies. You can also shop for price. Generally speaking companies which are so-called direct writers State Farm is a good example are cheaper than companies which employ insurance agents who are independent agents and charge a bigger commission. Some people say that an insurance agent will give you service and advice which is very valuable. On the whole I think the decisions surrounding the purchase of automobile insurance are not so complicated that for many people in the advice they get from an independent insurance agent is worth it. Perhaps I make an enemy a lot of my insurance agent friend by saying it but I honestly think that

the advice that you get the decisions are not that complicated it's not for example like buying a life insurance policy where decisions can get very complex as to how your estate your taxes will be affected. I think direct writers make sense the trouble with the direct writers like State Farm is that they they're very limited in home they'll insure they they want to insure or just people who are middle aged and middle class and who are very good risk so that many of us who are older or younger who live in a ghetto area perhaps can't buy from the direct writer but there are there are companies. The insurance company in North America in Philadelphia is a company which is a company which usually charges lower rates it doesn't charge so-called bureau rates I don't mean to get into too complicated an area here but there are companies such as the insurance company of North America which charge lower rates than many other companies and it pays to shop around the Consumer Reports. June

1070 has a very explicit discussion of which insurance companies charge less and which of them give the best service. And they're very frank about it they for instance condemned very vigorously Allstate which is another Illinois company located outside of Chicago and the Sears Roebuck Company and they condemn all state as being bad on servicing. And I'm sure that you should avoid if you can't state farm on the other hand which is another direct right another like companies giving very high grades both in cost and in the service they give so that this Consumer Reports is a very specific and hard hitting account of which companies are best to buy from. Let's return to Betsy and George Bates to see how they're faring in their discussion of insurance. Mr. Evans are also concerned about the new house we're buying. We do want to have it well

covered by insurance the bank says they can't even finalize a sale until it's insured. They told us that it might burn out even before we moved in which I think is a terrible thought. It anyhow. Can we pick the best policy which would cover such a disaster. Yes there are. Five forms of homeowners policies. The form one is a basic form that generally includes only the coverage that is standardized that is far in extended coverage. Theft and liability insurance form two is a broader form that covers some of the more unusual losses such as freezing damage or certain forms of water damage collapsed form 3 is for all risk coverage on your home. But not all risk on your continence Form 4 is for people who do not own their own house for tenants in an apartment or a multiple dwelling unit.

Inform 5 isn't all risk coverage on both contents and your house. That's clear enough to get you mention life insurance now that's very confusing to me I've been talking with the gals at work and I really don't know what to think. Yeah I've heard of that so much about 30 pay life annuity benefits term insurance. A lot of all these terms mean all right there are two very basic classifications of life insurance. One is temporary protection which is like term insurance and it has a great many forms. And the other is permanent life insurance which is typified by ordinary life insurance. The term insurance expires after some term of years one year five years ten years perhaps at age 65. The permanent life insurance i gives you the protection until death.

The endowment form of coverage has just about passed out of the picture but this is basically a savings flaws. People used to buy a thousand two thousand dollar policy on a child 20 year and down one so that that would be this amount of money available when the child reached college age or at all state. The. Other. Oh differentiations of permanent insurance might be the twenty pay life where instead of paying for the rest of your life you make your payment period for 20 years. Thirty year life means that you pay for your premium allway 30 year term retirement income insurance. Builds up cash value is rather rapidly and then at age 60 or 65. To convert it into an annuity that pays you an income for the balance of your life. But now with all these alternatives we have how in the world do we choose.

I think the first thing that you ought to do is to find out very definitely how much group insurance is available to you through your employer. This is the basis that you start out with from that point on you start looking at your needs. I personally don't think a young couple should burden themselves too much with life insurance. A young girl until she has a family. Can probably return to work or are gain work skills. I don't believe that a young man has to provide $500 a thousand dollars a month or whatever for her up until the time that. She passes on. After one of two children comment like the picture changes dramatically then and as a family acquires more assets they have different needs for life insurance. Right now I think you should think in terms of what need you have for the

expenses of a last illness taking care of the outstanding bills perhaps deciding what you want to provide a wife in the way of a yeah and I just meant income. Now I'd like to get into this a little more deeply. Let's suppose that I take a straight life policy now which company should I pick. I mean do I choose my Koster service or what. It's a rather difficult situation. We generally assume that size equal strength nationwide. Advertising equal strength. This isn't necessarily so but it is certainly an indication the age of the company is perhaps a little bit more important than its size if they have survived for 50 years or 75 years. They seem to be able to go through periods of money Terry crisis depressions this sort of thing and this might be a little bit more important than the actual size of

the company. The life insurance companies rarely fail and they are regulated by the insurance departments to a great extent and their investments are regulated. So that and I dont think you have to look at all to mint failure as much of an alternative. The Better Life Insurance companies will have a better return on their investments and this will be reflected in lower cost to you. Betsy and George have weighed the alternatives of insurance for their home automobiles and lives. Now they must still ask searching questions about medical and hospital insurance. The baits are in good health now but they know many older relatives who have spent months in the hospital and found medical

bills a great financial burden. George asks a friend James gallivant who has supervised a group medical insurance for industry and is presently manager of insurance and employee benefits at the University of Illinois. I'm glad you take the time out for lunch and tell me a little bit of OP's medical insurance I might rely on your experience because I just don't know which coverage will be adequate. Some policies pay more in one area and others in another area now but she and I have an opportunity to enroll for group insurance at our job. Should we do that. Nor should we buy a policy on our own. Well George I can think of four good reasons for purchasing a group medical insurance contract and only one good reason for purchasing an individual policy. Now the reason for purchasing a group insurance contract or one under most group insurance contracts there are no exclusions or restrictions for you or your dependents for any preexisting health impairment. Under an

individual policy however the company may decline to issue a policy or may exclude benefit payments for treatment of the condition or illnesses related to the condition. A second reason for favoring a group contract is that your coverage will be continued regardless of the number of claims or the amount of claim payments that you have while insured. The in-charge got May cannot cancel your policy unless they terminate the coverage for everyone in the entire group. Under most individual policies the company can cancel a policy at any time. Or it can decline to renew the policy of this anniversary date. The third reason for group contract is that you will find a more comprehensive benefit plan. Generally under an individual policy. Your benefits will be scheduled to a certain dollar amount as the group contracts will normally cover the actual expenses. The fourth reason is the cost of a group insurance contract is generally conserved less expensive. Than individual policy.

This is due to a number of reasons such as less expense in collecting premium dollars because they are through payroll deductions. The disadvantage of group insurance is that it is contingent. Upon your employment with a firm. If you leave the employment of a firm you will generally have to surrender your group insurance contract. You will generally have 30 60 days after determination of employment. To purchase a conversion policy conversion policy will provide less benefits and be more expensive and would be quite similar to an individual policy that you would have available to you in the open market. This usually does not impose a serious problem because normally you will be employed by another firm and when again have group insurance available to you. And that's what about choosing between group medical insurance policies. How do I know whether we should take a family policy at the airbase where I work or with Betsy's employee group.

Well the most important thing to consider and evaluating your group insurance contracts and you have to available. Is the prospect of being able to continue to contract less ignore benefits for a moment. And think about your particular situation in which you are employed at the airbase and Betsy is employed through the city. Now. As I mentioned to you before the ability to. Continue your insurance is contingent upon your continued employment with the firm. If as an individual employee at the airbase you elect to be insured under that plan and city and Betsy he likes to be insured under the city's plan. This is the cheapest arrangement for purchasing your insurance. Because you have the employer employee rate only and your employer is contributing to the cost of your insurance. However if next month's Betsy would quit her. Job or would

become pregnant. Then you may not at that time have the opportunity to add her to your policy and she would only have to have available. The conversion contract. Also. Under most group insurance contracts arrangements. If a an employee is insured does not purchase family coverage and there is no maternity of it benefits available. This would mean that if Betsy became pregnant and therefore quit work then she would have no maternity benefits at all. Most insurance salesman will make an honest effort to provide the best coverage to fit your needs. A few who may offer more insurance than you really need and this is why consumers must do comparative shopping. But some salesmen are ready to deceive you and make a handsome profit with no intention of providing insurance coverage. Charles a Miller assistant chief inspector of criminal

investigations at the Post Office Department discusses these dishonest promoters. You're probably aware of the fact that perhaps all states now you must be insured to drive an automobile This is relatively new. What 5 10 15 years ago this was not so everybody now has to have insurance. If you have an accident or two very hard for you to get insurance. So. Dishonest promoters maybe with an insurance background are aware of the fact that there's quite a number of people around that are searching for a system for an insurance company so they set up a high risk insurance. The premium sound they'll advertise premiums they don't sound too bad. The protection is tremendous. They begin selling insurance now they must. That's a rather complicated sort of thing and perhaps I shouldn't get into it now but. The insurance they must be they must be registered and accepted by the. State insurance commissioner in the state in which they're

operating. To do this they have to submit financial financial report to the insurance commissioner and it must indicate that they have assets already before they begin selling insurance that they have certain their assets they cannot sell. More insurance than their assets will permit them to pay claims. Supposing after the first month an awful lot of Kwaito are they going to be able to pay it. But it takes a long time for state insurance commissioners to actually verify this financial statement. A promoter can show that he has stocks and bonds of certain values and so on maybe these are obscure stocks and bonds. That takes quite a while too for the insured so he can operate for a period of a year or two years and he just can sell a range of millions of dollars worth of insurance the claims he made in the beginning pay make token payments to certain claims so that the commissioner doesn't think well immediately this is a bad i better get a check in this trial or

you know make token payments but a lot of them will lay there as the claims develop and be the promoters entire purpose is to go into bankruptcy after about three years or four years let's say. He just lets those claims pile up and goes into bankruptcy. Now he can just go in there now try to trace the what happened to all his premium money that came in well a clever insurance swindler will devise means of milking that money out of the corporation. He may for instance set up a consultant agency. He is a consultant agency but he uses a some kind of a corporate shell and maybe has a front man and he pages you'll find in the books that he's been paying each month $30000 to so-and-so as a as a consultant in insurance matters. Actually the money is coming to him. That is to the promoter. You

see there are many dodges by which a promoter can milk this the money out of an insurance company and let it go under leaving thousands of people with arcane claims unpaid and so forth. Buyer beware. Still a byword of the consumer shoppers search for information and protection to buy the best for the least. Our next program will follow these consumers to the doctor. Patients complain of a pain in the neck on the next buyer beware. This is the national educational radio network.