By Dr. James M. Dale, Founder of WCI
I get accused of being anti-insurance all the time. Nothing could be further from the truth. While I’m not a fan of mixing your investments with insurance—through high-commission products like whole life, variable universal life, indexed universal life, and annuities—I’ve taught for more than a decade that if you have danger. need of a financial disaster, you need to insure yourself well.
I recently dealt with three insurance claims at once. One was for breaking into a building 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 hesitation, I really mean it. The level has fluctuated more than 110 feet in the time we’ve been there alone – 35 feet in the last year (drought!).
Needless to say, this leads to many 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 easily visible. But at the right level, he’s essentially invisible until you hit him. Well, I hit one. I wasn’t going very fast and nobody got hurt, but it was a pretty good shot. We got back to our camp and I took off my diving mask and went down to check on her. Not too bad: little gelcoat damage; the prop was thrown away; and the steering was a bit stiff. After replacing the underwater propeller (I wanted to be able to say it was my first time), we enjoyed the next four days on the lake before heading home and dropping the boat off at the shop.
Imagine my surprise (not really) when the store called with an offer of over $25,000 in compensation. It turns out that gelcoat repairs are really expensive, as is replacing a very slightly bent propshaft. Have I mentioned that boat insurance can be one of the best deals in the insurance world? Our premium is $294 per year. The $5,000 deductible doesn’t even cover minor gelcoat damage repair. It costs more to insure a $5,000 beater than 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 had to spend some time with bright lights, a cold weapon, and an orthotic. If you’ve ever had surgery, you know it’s pretty expensive. The surgeon and anesthesiologist bills are not too bad. Prep imaging and radiologist bills aren’t too bad. But that hospital bill, wowza! Even after going through insurance for their negotiated price, this is still enough to put a lot of financial strain on many families. Our high deductible is not far from that price. Even our out-of-pocket maximum for the year is not far from that price.
This brings me to the unsung benefit of insurance. With insurance, you don’t have to worry about the financial impact of your misfortune, and you have no incentive to make cheap money. You get the best of everything. If I’m going to pay my $5000 deductible on this boat, it’s going to the best gelcoat shop in town and they’re going to make it like new. There’s no incentive to just slap a little patch on it and call it good. Or just leave it since it’s on the bottom of the boat anyway. Fix her baby and make her look great!
It’s the same with surgery. We want the best of everything. The best surgeon. The best anesthesiologist. Hell yeah, we want that CT scan. Yes, we will have him in this fine new hospital. Five nurses to help with the case? Of course why not? Did you know they make dresses that slip right into the Bair Hugger bed these days? I haven’t, but now I do!
We actually had a great surgical experience (special thanks to Dr. Trask Moore and Randall Bridy). What is the price? I have no idea and I don’t care. I actually know the price. This is our max pocket for the year and I’m fine with that because I don’t think we’ve ever hit it in the past. (Which probably explains how our HSA has grown into six figures over the years). An added bonus? The rest of the health we consume this year is now free! My son told me he won’t be drinking milk for the rest of the year in hopes of breaking just to get his money out of it. By the way, check out this Explanation of Benefits (EOB):
Katie is now the proud owner of a plate and six screws. But four of the screws cost a penny a piece, and two of them cost over a thousand a piece. Making screws is a good business if you can get it, but you better make the right ones!
Seriously though, having to use your insurance benefits is never fun. I’d rather not have to deal with damages, injuries and the headaches of claims. Although I suppose it might not be that painful to put your boat out of service all summer when you’re in a no-load condition anyway, so I guess if you’re going to damage both, it might be good to do it at once !
The trouble factor
Speaking of hassles, the most valuable thing an insurance company can do for me is a smooth claims process. It rarely happens though. It was particularly bad with this boat damage claim. The claims adjuster actually refused to repair all the gelcoat damage on the bottom of the boat because he didn’t believe a boat could have more than one point of rock impact.
He claimed it was “dock rash” on the bottom of the boat and therefore normal wear and tear. I have no idea how you hit the bottom of the boat at the dock. It was strange. No amount of protesting or arguing would change his mind. There was no appeal process or attempt to retain the customer. After speaking with the dealership and gelcoat dealer, I learned that Progressive Boat Insurance has really gone downhill in the last few years when it comes to customer care during claims. I wish I had asked them before the claim. Learn from my mistake. If you have a Progressive like us, I suggest you switch. As we did. But we did it too late. But the issue is certainly a great reason to self-insure whenever possible.
Insurance is all about risk transfer. Can we afford to repair this boat out of pocket? Yes, thanks to several decades of diligent saving and investing, we absolutely could. We could even pay cash for this operation, I suppose. But it sure is nice not to pay for it (at least in addition to the health insurance premiums we buy every month). More importantly though, it was great to get the best of everything without even thinking about the price.
There’s some value there that I’m not sure I’ve ever really considered.
What do you think? What was your last insurance claim? What did you like and dislike about the experience? Comment below!