By Dr. James M. Dahle, WCI Founder
I get accused all the time of being anti-insurance. Nothing could be further from the truth. While I'm no fan of mixing your investments with insurance—via high-commission products like whole life insurance, variable universal life insurance, index universal life insurance, and annuities—I have taught for more than a decade that if you have an insurance need for a financial catastrophe, you should insure well.
Recently, I was dealing with three insurance claims at once. One was for a break-in for a building syndication I manage, but the other two were claims on our personal insurance policies. Here's what happened.
Making Insurance Claims
The first of these was a claim for damage to our boat. Our favorite lake has fluctuating water levels. And when I say fluctuating, I really mean it. The level has varied by more than 110 feet just in the time we've been going there—35 feet in the last year (yay drought!).
Needless to say, that results in a lot of underwater obstacles. If the water is two feet higher, your boat will never touch that rock. If it is two feet lower, that rock is out of the water and easy to see. But at just the right level, it's essentially invisible until you hit it. Well, I hit one. I wasn't going very fast and nobody was hurt, but it was a pretty good smack. We puttered back over to our camp, and I pulled out my dive mask and went down to check it out. Not too bad: a little bit of gelcoat damage; the prop was trashed; and the rudder was a little stiff. After an underwater propeller change (I wish I could say that was my first time doing that), we enjoyed the next four days at the lake before heading home and dropping the boat off at the shop.
Imagine my surprise (not really) when the shop called with a quote for more than $25,000 in damages. It turns out repairing gelcoat is really expensive and so is swapping out a very slightly bent prop shaft. Have I mentioned that boat insurance might be one of the best deals in the insurance world? Our premium is $294 per year. The $5,000 deductible doesn't even cover repairing minor gelcoat damage. It costs more to insure a $5,000 beater than it does a six-figure boat. It's amazing. I think it's the best value for insurance of any policy I've ever owned.
Later that month, one of our family members needed to spend some time with bright lights, cold steel, and an orthopod. If you've ever had surgery, you know it's kind of expensive. The surgeon and anesthesiologist bills aren't too bad. The preparatory imaging and radiologist bills aren't too bad. But that bill from the hospital, wowza! Even after it runs through insurance for their negotiated price, it's still enough to give lots of families serious financial strain. Our high deductible is nowhere near that cost. Even our out-of-pocket maximum for the year is nowhere near that cost.
Not Having to Worry
This brings me to an unsung benefit of having insurance. With insurance, you don't have to worry about the financial impact of your misfortune, and you don't have any incentive to cheap out. You get the best of everything. If I'm going to pay my $5,000 deductible on that boat, it's going to go to the best gelcoat shop in town, and they're going to make it like new. There's no incentive to just put a little patch on it and call it good. Or to just leave it since it's on the bottom of the boat anyway. Fix her up, baby, and make her look great!
Same thing with the surgery. We want the best of everything. The best surgeon. The best anesthesiologist. Heck yes, we want that CT scan. Why yes, we'll have it at that nice, new hospital. Five nurses to help out with the case? Sure, why not? Did you know they make gowns these days that plug right into the bedside Bair Hugger? I didn't, but I do now!
We actually had a marvelous surgical experience (special shout out to Drs. Traske Muir and Randall Bready). What's the price? I have no idea, and I don't care. Actually, I do know the price. It's our maximum out-of-pocket for the year, and I'm OK with that because I don't think we've ever hit it in the past. (Which probably explains how our HSA has grown to six figures over the years). Added bonus? The rest of the healthcare we consume this year is now free! My son tells me he's not going to drink milk the rest of the year in hopes of a fracture just to get our money's worth out of it. Incidentally, check out this Explanation Of Benefits statement (EOB):
Katie is now the proud owner of a plate and six screws. But four of the screws cost a penny apiece, and two of them cost over a grand a piece. Making screws is good business if you can get it, but you better make the right ones!
Seriously, though, it's never fun to have to use your insurance benefits. I'd much rather not have to deal with damages, injuries, and the hassle of the claims. Although I suppose that maybe it's not as painful to have your boat out of commission all summer when you're on non-weight bearing status anyway, so I guess if you have to damage both, maybe it's good to do it all at once!
The Hassle Factor
Speaking of hassles, the most valuable thing an insurance company can do for me is a hassle-free claims process. It rarely happens, though. It was particularly bad with this boat damage claim. The claims adjuster actually refused to repair all of the gelcoat damage on the bottom of the boat because he didn't believe that a boat could have more than one point of impact on a rock.
He claimed it was “dock rash” on the bottom of the boat and was thus normal wear and tear. I have no idea how you hit the bottom of the boat on the dock. It was bizarre. No amount of protesting or arguing would change his mind. There was no appeal process or attempt at customer preservation. After talking to the dealership and gelcoat dealer, I learned that Progressive boat insurance has really gone downhill the last couple of years as far as taking care of its customers at claims time. I wish I'd asked them before the claim. Learn from my mistake. If you have Progressive like we did, I suggest you change. Like we did. Only we did it too late. But the hassle factor is certainly a great reason to self-insure when possible.
Insurance is all about transferring risk. Could we afford to repair that boat out of pocket? Yes, thanks to a couple of decades of diligent saving and investing, we absolutely could. We could even pay cash for that surgery, I suppose. But it sure is nice to not be paying for it (at least in addition to the health insurance premiums we buy each month). More importantly, however, it was awesome to get the best of everything without having to even think about the cost.
There's some value there that I'm not sure I ever really considered before.
What do you think? What was the last insurance claim you had? What did you like and dislike about the experience? Comment below!
Ha! You never really considered the value Bc you were blessed not to have to use insurance! At least to this extent.
I am definitely a big fan of (proper) insurance. After only 7 years in my house already made 3 claims totaling 75k. Franklin mutual is the Bomb! Although I’m sure they are sending hitmen out for me as we speak.
Also, do you think claims adjusters get stingier when insurance companies are not doing well financially? Wonder if there is some insight there into that sector of the economy.
Wishing Katie a speedy recovery!
Agree that proper insurance is critical, especially higher liability auto and at least a 7 figure umbrella. Your boat insurance probably is cheaper because they fight those claims like you discovered. My auto insurance has always been a bit higher than the cheapest I could find but never had issues with claims, and with 5 kids I’ve had plenty. Also, had accident and ticket forgiveness for being a long term policyholder. As you said, it’s a transfer of risk, well worth it. And you know that ortho surgery is worth every penny!
There’s not doubt that the customer service focus has gone downhill (pretty drastically) over the past 10 years or so. I’m in the property insurance claims business (I help people and businesses navigate the claims process) and it’s often a challenge to get the true benefits of the polity in today’s climate. Additionally, the policies themselves have become leaner, with more exclusions and less coverage. Today, you really need to know what you’re buying as what you used to be able to count on for coverage, has bee scaled back substantially.
I have Progressive boat insurance, now you’ve got me worried and willing to shop it around again. Any suggestions on other companies that you’d suggest to switch over to?
The repair shops suggested All State and State Farm.
Did you look at USAA?
USAA partners with Progressive. That’s how I ended up there in the first place. Not happy about it.
I am in the same boat. Former military doc–>USAA insurance for everything, including being led to Progressive for boat insurance–>now concerned. calling state farm tomorrow.
I’m in this situation where I’m “house-hacking” by renting out the mother-in-law suite in my home and I don’t think my primary occupancy insurance policy covers this. Do I need to get a separate landlord policy? I’m wondering how people normally deal with this. It would be annoying to have to pay for two separate policies at the same time.
“The rest of the healthcare we consume this year is now free!”
With every high deductible plan I’ve had over the years, the family deductible was higher than the individual deductible, typically double. So there was no way for one person’s expenses to meet the entire family’s deductible. How common is a plan like yours?
That’s a good point. I’d better look at that a little more closely.
Forgive me, but you lost me at the end. Did the insurance eventually pay to repair your boat or not?
Not everything I think they should have paid for, no. I mean, the story isn’t actually over yet. We haven’t had a boat for 10 weeks this summer and right now the dealership is waiting on a rudder to come in. Not happy about that either.
The hassle-free part is vital for me too. With our house, we had some shingles blow off a couple of years ago due to high winds. It was a steep pitched scary roof and a small job. No roofers were interested. Called our insurance company and explained our challenge and my concern about getting water damage – they had roofer there to fix it the next day.
-LD
You had a post at some point suggesting how we could reduce health care costs as a nation. And maybe how less rich countries achieved similar outcomes. Would the first- class ortho surgery experience and all the extras (bluetooth Bair hugger and whatnot) be an example of why we spend so much. I would spring for the top line everything for my family member also. It’s hard to pass on anything the surgeon recommends or offers for our own comfort, but we certainly don’t want that experience for those we support with public healthcare,, or even for others on our private insurance of it means higher premiums for all.
Yes, that’s an example of why we spend so much. I wouldn’t have sprung for the Bair Hugger if I had to pay for it; give me a break. But I basically already did when I paid the insurance premium.
There’s a lot to criticize in our health care system without a doubt.
I’m assuming you’re talking about the pre-op Bair Hugger. There’s actually a reason for it beyond patient comfort, but it rarely gets utilized appropriately. It’s there to pre-warm the patient so they don’t get hypothermic at induction.
Once you induce general anesthesia, the cool, peripheral blood mixes with the core, warm blood. The Bair Hugger is there to warm the peripheral blood to negate the cooling effect.
Interesting. Guess we should have run it longer!