I remember when we bought our first home. It was an exciting time. Like many buyers, we stretched our finances almost to the breaking point in order to get in. The house was a total fixer-upper, but we closed escrow and we were thrilled to be in a home of our own.
We experienced a steep learning curve with all the paperwork. In those days, it was common for realtors to use a “Deposit Receipt.” This was a multi-page document with lots of terms and conditions. The title at the top of the document was simply “Deposit Receipt” and I thought the document was a complex form of receipt. I kept waiting for a contract to be signed. Only much later did I realize the “Deposit Receipt” was the contract.
One of the tasks we had was to get insurance. We found out our lender wouldn’t make a loan until we purchased homeowner’s insurance. So we got a referral for an insurance agent and I called him up.
I met with him, and he seemed fine. He told me what he needed, and then he presented me with an application. This application was to be sent to the insurance company before they issued the policy. The application had blanks for all kinds of information about me, my family, my history and the property to be insured.
My agent surprised me. He provided me with the form and asked me to sign it in blank. None of the information was filled in. He told me to sign it and give it to him with no information included. With some surprise, I asked him how the form would be completed. He told me that he would fill it in and that he’d complete the form and submit it to the company.
I was floored. I’d never seen anything like this. I couldn’t understand why he’d want to handle my situation like this.
In hindsight, I see what was happening. This agent apparently had his own agenda. Even though he represented only one insurance company, he had an interest in getting this policy issued so he could receive a commission. It may have taken me a while to fill in the form. Either he could fill in the form faster and save time or else he wanted to put a positive “spin” on my information.
Was this a good idea for me? No. There’s a brief sign at some retail stores that says “You break it, you buy it.” The same is true of contracts and applications: “You sign it, you buy it.” Some people wonder if they are bound by contracts they sign without reading. The clear answer, in almost every case, is “Yes.” The same is true of applications. What happens if an application for insurance is either inaccurate or incomplete? Then the consumer is at risk. If there’s a loss, the consumer will make a claim. But the insurance company had a right to rely on the application when it issued the policy. If the application was wrong or deceptive, then the insurer may be able to reject the claim. The consumer may find out only at the last moment that because of inaccuracies in the application, their policy is worthless and their coverage for a loss is rejected. If this were to happen, then the consumer would probably claim that the insurance agent filled in the application incorrectly. But if the insurance agent denies this, or if the insurer believes the agent and not the consumer, then the consumer is still left with a problem.
This is something my agent years ago never explained to me. The clear answer? Consumers who sign forms in blank do so at their own risk.