Today’s advice-givers seem to be chock full of recommendations for consumers on how to cope with recession.
o Cut out the extras: stop dining out; drop gym memberships; and forego vacations.
o Target the basics: use the cheapest phone service; pull the plug on not-in-use appliances; stop/limit holiday gift giving; only buy generic foods, bundle up (phone, TV, internet); and run the dishwasher less often or not at all.
o Protect your finances: stay away from equities; avoid new financial purchases; and tap rainy day accounts as a last resort.
Then, there’s Feed the Pig, a campaign from the American Institute of Certified Public Accountants and the Ad Council. It urges adults, especially young adults, to save, save, save. (FYI: This may be working since, in December 2008, the personal savings rate rose to 3.6% of after-tax income, the highest level since May 2008, when tax rebate checks pushed it up to 4.8%, says the Commerce Department.)
When it comes to insurance, advice is all over the place, e.g., withdraw money from annuities; loan out, cash out or sell your life policies; take out high deductible and/or low-limit auto and homeowners policies; elect high-deductible health insurance (and use a health savings account too); seek reductions in long term care policy benefits; make hardship loans from 401(k)s; and/or put off certain insurance buys altogether.
Gulp. That’s my own reaction when I hear those “insurance tips.”
You see, all too often, these words of insurance advice are offered without qualifiers–namely, that there are possible consequences to policy changes that the consumer must also consider. The “experts” make the policy change solutions sound so simple that it creates an inaccurate impression of what will likely occur once the deal is done.
To be fair, some advice-givers do include admonitions to “see your financial advisor” or “consult your tax advisor.”
But that is hardly sufficient information when coming on the heels of, say, a recommendation that a person consider taking withdrawals from an annuity. Why not also mention that there could be early withdrawal penalties and tax consequences? What about the hit to long-term savings?
The danger is, without mentioning the possibly unwanted consequences to recommended insurance “solutions,” these advice-givers create expectations that the insurance business simply cannot meet.