Dave Ramsey : Dave Says: Staying on top of the insurance

Monday, February 16, 2009

Dave Says: Staying on top of the insurance

by Dave Ramsey

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Dear Dave,

A tree fell on our house yesterday and did quite a bit of damage. We’re talking with the insurance company now. Is there anything we should watch out for where they are concerned?

Ian

Dear Ian,

For openers, the insurance adjuster is not your pal. He works for a huge company which got that way by paying as little as possible. You have lots of rights under your policy, and you should insist on all of them. Let them know that you expect your house to be put back in exactly the same shape it was before the accident, and that you expect the work to be completed in a professional manner, and as quickly as humanly possible, by contractors whom you get to approve. This is your home we’re talking about! You’ve paid premiums for years, and now it’s time for the company to make good on their promise to protect you.

Adjusters are loyal to the company that pays them. There’s nothing wrong with that. Will some of them lie? You bet! Will some of them give you bad advice or send you down the wrong path? Oh, yeah! Certainly there are honorable adjusters, but there are some that will stretch the truth and more. Don’t be combative, but don’t be a wimp, either. And don’t sign a release until both your head and your heart know that you have been treated fairly.

- Dave

(burned by the bonus!)

Dear Dave,

My husband always gets a bonus at work around the first of the year. The problem is that his company never takes enough out in taxes, and we get clobbered at tax time. He makes $150,000 a year, and this time his bonus was $105,000. They withheld 18 percent, but that’s not enough. What should we do?

Karen

Dear Karen,

If you guys make $150,000 a year, that puts you in the 33 percent tax bracket – with or without the bonus. That means 33 to 38 percent of his bonus money will end up in Washington.

If I woke up in your shoes, I wouldn’t leave it up to the government or the company to get it right. I’d put about 22 percent of the bonus amount into a money market account just to be safe. I’d just let it sit there and be ready when tax time rolls around. That way you’ll be fine if you owe money, and you’ll have some extra savings if you don’t!

- Dave

(buying back from the military)

Dear Dave,

My husband served four years in the military before becoming a state trooper. He now has the chance to buy back his four years from the military. This would enable him to retire four years sooner. The problem is that the buyback cost is $10,000 a year. Do you think it’s worth it?

Amy

Dear Amy,

Mathematically it’s a bad idea. You’d be better off investing the money. Now, if there’s a happiness factor involved – if he hates his job, or something like that – it might warrant some additional consideration. Otherwise, you’re basically pouring money into a pension fund that dies when he dies. Even if there’s a survivor’s benefit for you, it just disappears when both of you are gone. You can’t take it with you!

There are three things you can do with money. You can spend it, you can save it, and you can give it away. I want you to make smart decisions and live like no one else, so that later you can live like no one else! If the money just disappears, you’ll have no chance to change your family tree or make a huge positive impact on your community through giving.

- Dave

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About The Author

Dave Ramsey is a personal money management expert, popular national radio personality and the author of three New York Times bestsellers.

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uwcharlie Location: SC

Reply # 1
Date: Feb 17, 2009 - 4:54 AM EST

Dave, you're an idiot

Did I get your attention, Dave? Having worked 40+ years in the insurance business (life, not property), I still think your emphasis that insurance companies are only trying to avoid paying claims is bad advice. You simply don't understand the principle of insurance. You buy insurance to protect you for some factor of the uncertainties of living, be it life, health, auto or property. To do this, you buy insurance to protect yourself, i.e., you make a legal contract with an insurance company. The contract (the policy) spells out your rights and duties and the rights and duties of the insurance company. If you are discussing a claim, it is wrong for you as a writer to imply that an insurer is always going to "avoid" paying a claim. Yes, if there is a reason in the contract of insurance to avoid the claim, the insurance company would be negligent to their other policyholders if they ignore the ability to avoid the claim. However, on the other hand, if the policyholder has a reason to collect on the policy, would you accuse the policyholder of doing everything in their power to collect on the policy? See what I mean? Insurance companies are in the business of insuring certain calamities of life. Insurance policies are legal contracts and claims on policies are strictly interpreted by the language of the policy. If the claimant has a legal case, the insurer pays. If the claimant has no legal case, no payment is made. In the future, let's play the game of discussing insurance fairly, shall we?

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tedmug Location: OH

Reply # 2
Date: Feb 17, 2009 - 6:55 AM EST

Sorry charlie

Dave is right, by my own experience.

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jaymay Location: FL

Reply # 3
Date: Feb 17, 2009 - 7:52 AM EST

Dave an idiot?

I agree, to a point.

I too have worked several years in the insurance industry, a property claim department. The industry is one of the most regulated businesses in the country. Actually, his advice is good, the attitude is wrong. Insurance companies have to have a good product to compete. Their product is fair claims settlement. Their product is NOT to completely take over your troubles and make them all go away.

To quote my boss, "We'll offer you a fair settlement. If you want to share it with a lawyer, that is up to you."

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anewell Location: KS

Reply # 4
Date: Feb 17, 2009 - 8:07 AM EST

We agree with the article

We had insurance, we were hit by a tornado. In the end run, to get the insurance company to pay on the claim, we had to file suit. We won the lawsuit. However we were not awarded enough money to replace the home so we now live in our shed, which was rebuilt after the tornado as well. But it did cost the insurance company over $200,000 defending their right to screw us. If they just would have replaced the home it would have been settled. But they chose to fight us every step of the way, as if it was our fault. They even insisted on sending out their own contractor to give the bid and that was the ONLY bid they would accept and at the trial, he admitted he had no intention of doing the work. He was just giving a low ball bid to the company so he could get more jobs down the road. In our state, there is no training/certification for adjustors. They could hire your 90 year old mother to adjust the damage to a home and she would not have know the difference between a joist, a shingle or a sill.

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Mrs. Paddy Location: FL

Reply # 5
Date: Feb 17, 2009 - 8:08 AM EST

Don't miss Laura Hollis' Column

Today.

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Michael Location: MD

Reply # 6
Date: Feb 17, 2009 - 8:24 AM EST

Another insurance adjuster chimes in ...

Dave - If you had ever walked a mile in my insurance adjuster shoes, you'd have a completely different perspective. I did liability adjusting for 12 years and finally got out of the business when I just couldn't take it any more. I was taught to treat people fairly and make them "whole" again without enriching them. If the fender of your five year-old auto is dented, are you entitled to a brand spanking new fender or the repair or replacement of the fender with one like it before the accident? If you do something careless and get hurt, is there any reason my insured shouild pay you for your recklessness? I don't think so. I was amazed at how many people think that they should be paid handsomely for violation of the "Three Year Old Rule". That's the one which says that when you're three years old, you shouild learn to watch where you're going and pick up your feet.
Some of your advice is good. By all means, don't sign a release until you are satisfied with the repairs to your property. Just don't expect the insurance company to pay to turn your your sow's ear into a silk purse, please.

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QParker Location: TX

Reply # 7
Date: Feb 17, 2009 - 8:52 AM EST

Dave I Would Disagree.......

..in regards to the buying up of prior service credits. Depending upon the benefit formula used in the state troopers retirement plan the $40,000 could provide significantly more purchasing power than putting the money in a good mutual fund. The better public employee retirement funds offer sophisticated investment approaches and are segregated from plunder by avaricious politicians. Additionally, when needed, a COLA protected survivor benefit will shield a surviving spouse from assuming an investment risk they may not be prepared for.

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Bubba Location: TX

Reply # 8
Date: Feb 17, 2009 - 8:54 AM EST

Insurance I

Dave, you did say there were hnest insurance adjusters. I have been an insurance adjuster for almost 43 years. I have worked in Auto and General Liability, Auto Physical Damage, Workers Compensation, Burglary, Residential and Commercial Property.

Since 1982 I have specialized in Commerical and Residential Property as a Regional Property General Adjuster, Senior General Adjuster and Executgive General Adjuster. I have been an aouto appraiser, field adjuster, supervisor, senior field adjuster. I worked 29 years 4 months and 19 days for the Hartford. The Hartford is ranked in the top 10 almost every year for excellent claim service. I have also worked as an independent adjuster since I retired from The Hartford in 2002.

I have worked hurricanes Allen, Gloria, Katrina, Alicia, Isabel and Iniki, hail storms, tornadoes, earthquakes, floods including. I have letters from policy holders and independent insurance agfents thanking me for the service. I have helped people who haved had serious home and business fires. I have also defeated several arsonists and fraud rings. I am proud of my service to a very needed profession.

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Bubba Location: TX

Reply # 9
Date: Feb 17, 2009 - 8:56 AM EST

Insurance II

The biggest problem with today's insurance industry is the training. All the young people want to be the VP of Claims in a year and do not study and learn their profession like the old salts taught me. I have taken several young men and women and mentored them. Some of them responded properly and some just did not have what it takes to be a real professional.

I was taught to pay what the policy called for as quickly as possible. I always took pride in sitting down with an insured and explaining the policy in detail so they would know what they needed to focus onto properly submit their claim.

There are too many people going to 2 week school and getting their adjuster license and going to work for a Catastrophe Adjusting Company who cannot read a policy. The problems are usually one of quality control. However, there some just pure azzholes who think their job is to save company money. I always weeded them out as fast as possible if they could not be educated to the right way.

An insurance company can recommend a contractor. No one ever has to use the contractor. A release is almost never taken on a property or other first party loss. A policy holder's release is taken when there is a dispute which is settled by compromise.

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Bob Location: TX

Reply # 10
Date: Feb 17, 2009 - 3:04 PM EST

SAME EXPERIENCE

With an auto insurance adjuster. Someone backed into me in a parking lot and both companies wanted to call it mutual responsibility. This was the first claim I had ever had after 5 years of paying this company premiums. I refused to accept their first offer to settle and after some major discussions back and forth we settled on a fair amount to fix my car. Stand firm and get more back up data the companies will yield to a more equitable settlement.

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PVZ Location: LA

Reply # 11
Date: Feb 17, 2009 - 6:55 PM EST

MISERLY INSURANCE COMPANIES

There is no question one needs to know his rights in making an insurance claim. Ronald Reagan's aphorism, "Trust but verify," is always sound advice. However, the gratutious and insulting charactarization of insurance companies as "huge compan[ies] tha got that way by paying as little as possible" is silly. I have had several personal insurance claims, from the multiple hurricanes we have had here in Louisiana lately, from a hail storm last year and from other miscelaneous events. In each case, my insurers (and they weren't all the same) actually paid me more than it cost to fix the damage, did not care what contractors I used and treated me with respect. Most people I talked with after the hurricanes in particular reported similar experiences.

Insurance companies do exist to make money for their shareholders or policyholders, depending on whether they are stock or mutual companies. They have a legal, fiduciary duty not to pay bogus claims or for damages not covered, and not just to give away money willy-nilly. Sometimes whether or how much is owed is not altogether clear. Good faith disputes will happen. However, they an insurance company will not be in business long and surely won't expand its business--and will be in constant trouble with the ubiquitous insurance regulators--if they really make a habit of denying or shorting policyholders on legitimate claims.

There are some fly-by-night companies and some asinine adjusters, but the vast majority of insurers and adjusters just want to do right by both claimants and the company owners and to avoid litigation if possible.

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Tom Location: MO

Reply # 12
Date: Mar 8, 2009 - 10:03 PM EST

Adjusters

Nice to hear from the guy in LA about honest adjusters. I worked for a company for almost 40 years and was NEVER told not to pay a claim or to pay too little. I was ALWAYS told to pay the fair market value for the claim. The prevailing theory of my company, and all the others whose adjusters I talked to, was that we got and kept our business by satisfying our customers, and that meant paying fair value for their claims. In my experience, the vast majority of those who said we paid too little were those who were trying to get too much - in essence, cheating.

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