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Arbitration is not worth any "discount"

When you receive something for "no cost," but have to provide information to the entity providing your "free gift," it is often said that you are the product that is being sold. When a business offers something at a discount or reduced price, it is unlikely it is truly "free." The company is in business and it would be difficult for them to pay their bills if they gave their products away.

So, in most cases, the reduced- or no-cost item is accounted for in higher costs for other goods or services. This is why you should always be careful when purchasing anything at a discount. This warning applies with greater force when it comes to insurance. For instance, you may find one company offers a much lower premium for what appears to be similar coverage.

That is until you notice the deductible. One homeowner's policy may have $500 deductible, while the other may come with a $5,000 deductible. It may seem like a good deal until you have to cover that deductible on your own.

One frightening example of this has shown up in Texas, where an insurance company is asking for permission from the state to offer a discount to buyers in return for their agreeing to arbitrate any disputes with the insurer.

This prospect is troubling because many individuals would not understand that they are abandoning their right to sue the insurance company in court. If a dispute with the insurer arises, they will be stuck with an arbitrator of the insurance companies choosing and their dispute will be decided by rules created by the insurer.

Arbitration agreements almost always are a bad choice for consumers. They typically also forbid group litigation via a class action and often there is no right to appeal a bad decision. Should this be approved in Texas, it is likely insurers will attempt to obtain approval in other states. If this were implemented in Minnesota, all policyholders should be aware of the risk posed by this type of an agreement.

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