Five Insurance Traps

Here's a list of five insurance traps from MSN Money:

• Caesarian sections -- If you're not covered by an employer plan and you're trying to buy an individual health insurance policy, you'll typically pay more for maternity benefits, which help cover the costs of carrying and bearing a child. But maternity coverage may be more expensive, or not available at all, if you've had a child by Caesarian section.

• Trampolines -- Kids love them, but many insurers don't. Some will charge a higher rate to cover the increased liability for injuries, while others won't cover you at all.

• "Bad" dogs -- Some insurers have blacklisted certain breeds, such as pit bulls. Others will cover any dog until it bites, and then you could lose your coverage, pay more for it or be forced to sign a waiver that excludes any further damage done by the animal.

• Bad credit -- In most states, insurers that provide homeowners and auto policies are allowed to consider your credit history when deciding whether to issue or renew a policy, as well as how much to charge.

• Mental-health problems -- If you've ever taken antidepressants, seen a therapist or been treated for an addiction, you may pay more for life insurance. If your problems are serious or ongoing, you may have to search hard to find a policy at all.

Here are some thoughts on each of these from me:

• Caesarian sections -- Not an issue for us and I can't really comment intelligently on this (I know, when has not being able to comment intelligently ever stopped me before?) ;-)

• Trampolines -- A co-worker of mine had this issue. I think she ended up taking the trampoline down. If any of you watch AFV, you'll know why insurers hate these things.

• "Bad" dogs -- Since we've discussed this issue before, I asked my agent what AAA's policy was. He said that if you have a dog, it's no problem. If your dog bites someone, they'll cover it, but then it's a problem (for potential future coverage).

• Bad credit -- We saved a boatload on our homeowner's insurance by having a great credit score. Unfortunately, the opposite holds true as well -- if your score is bad, your rates will be higher.

• Mental-health problems -- I have a friend who is on anti-depressants and since it was a "pre-existing condition", and future treatment she has in this area is not covered by her insurance.

Comments

[Noah]

We should definitely discourage people from taking anti-depressants or seeing a therapist. Disgusting.

I would love to learn Noah's solution!

[Jadzia]

I agree with Noah completely. My family depends ENTIRELY on me to support them, including health insurance. I am severely depressed (probably because I work 12+ hours a day, every day) and have been untreated for literally years because I know that if I do seek treatment, I will never be able to get health or life insurance again.

[beth]

I'm surprised there aren't more comments on this posting except that perhaps this has the same effect on everyone else as it does on me - absolutely terrifies me. I've currently got a great job with good health insurance...BUT...if I ever lost my job I'm in danger of getting caught by the c-section exclusion. And, my husband needs anti-depressants. It's very scary to realize if either of us needed to buy health insurance on the open market we likely could not. And we're generally very healthly people, highly educated, with skills companies generally want to pay for. I've known too many friends who with a snap of bad luck turned from haves to have-nots in the health insurance game and owe horrendous sums of money...despite being responsible thoughtful people. I'd like to start my own business, but due to the health insurance issues it's too big of a risk!

[Jim]

The insurance industry is making these choices simply because of financial reasons. It just costs more to insure people with the higher risk factors.

Sometimes that makes sense and is reasonable. Pit bulls, trampolines and low credit scores lead to higher risks and higher claim rates.

Health and life insurance have always looked at risk factors as well. ANY pre-existing condition could have the same problems as mental health history. The insurance companies aren't in it to be nice and cover everyone. They're running a business to make money.
THe only way they'll give everyone coverage regardless of existing conditions is if there are laws that require them to do so. Right now I don't believe we have such a law nationally. So yes unfortunately many people with pre-existing conditions will get turned down from individual health care plans simply cause the insurance company doesn't want the financial risk and just thats how things work.

29 states do have health insurance programs that can help people who have been turned down for individual health insurance:
http://www.cobrahealth.com/statehighriskpools.html

Jim