mad anthony

Rants, politics, and thoughts on politics, technology, life,
and stuff from a generally politically conservative Baltimoron.

Sunday, March 23, 2008

Yet another example of the wisdom of the press on finances...

So I'm at the parent's house, finishing breakfast and sipping on a second cup of coffee while reading the Newark Star-Ledger Business Section. It has an article on the front page - Slice Your Spending -10 tips to reduce expenses. Most of the info is fairly boilerplate and good stuff - eat out less and stay away from high margin stuff like beverages, booze or dessert, pay down/consolidate debt, be smarter about grocery shopping. Some of it is questionable or at least not explained well, like cut cable from one of your TV's (which, at least where I live, will save you a few bucks if you are renting a cable box, but won't make a difference if you won't. I have my main living room TV hooked up to a digital cable box, but have my bedroom, basement, and tuner card in my pc hooked up to analog cable - I can unplug them, but it won't save me anything).

But there was one piece of advice on page 5 of the article that was flat-out wrong:

. Insurance: This goes for homeowners, auto and life insurance. Also, remember if you [B]lower[/B] your deductible, the cost of your policy will go [B]down[/B]. Call your insurance company so your particular policy can be examined for other cost-cutting measures.

Clearly written and proofed by someone who has never bought insurance. Lowering your deductible raises your rates. Raising your deductible lowers it.

For those who have no clue how insurance works, the deductible is the amount of money you are responsible to cover in repairs if you file a claim. If you have a $500 deductible and $1000 in damages, you will pay $500 and the insurance company will pay $500. If you have a $100 deductible, you will pay $100 and the insurance company will pay $900. Since the lower the deductible, the more the insurance company pays, the more they will charge. High deductibles also discourage you from filing claims for small amounts, which insurance companies like, since they save not only the money they would pay out, but the expense of processing all that paperwork.

It boggles the mind that nobody at the paper caught this - it seems pretty basic to me. And it scares me that people are getting advice from columns like this when the advice is not just questionable, but blatantly false.


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