By Dr. James M. Dahle, Founder of WCI
I get accused all the time of being anti-insurance. 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 insurance, variable universal life insurance, index universal life insurance, and annuities—I’ve been learning for more than a decade. that if you need insurance for a financial disaster, you should be well insured.
Recently I was dealing with three insurance claims at once. One was for a break-in for a building union 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 fluctuation, I really mean it. The level has changed by more than 110 feet just in the time we’ve been there – 35 feet in the last year (good drought!).
Needless to say, this results in a lot of underwater obstacles. If the water is two meters higher, your boat will never touch that rock. If it’s two feet lower, that rock is out of the water and easy to see. But at the right level, it’s basically invisible until you hit it. Well, I hit one. I wasn’t going very fast and no one got hurt, but it tasted pretty good. We got back to our camp, and I pulled out my diving mask and went down to check it out. Not too bad: little gelcoat damage; the prop was trashed; and the steering was a little stiff. After an underwater propeller change (I’d like to say it was my first time doing this), 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 shop called with a quote for over $25,000 in damages. It turns out that gelcoat repair is really expensive and so is replacing a very slightly bent prop shaft. Have I mentioned that boat insurance can be one of the best deals in the insurance world? Our price 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. That’s wonderful. I think it’s the best value for insurance on any policy I’ve ever had.
Later that month, one of our family members had to spend some time with bright lights, cold steel, and a brace. If you’ve ever had surgery, you know it’s kind of expensive. The surgeon and anesthetist 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, it is still enough to put many families under serious financial strain. Our high discount is nowhere near that cost. Even our out-of-pocket maximum for the year is nowhere near that cost.
There is nothing to worry about
This brings me to an unspoken benefit of insurance. With insurance, you don’t have to worry about the financial impact of your disaster, and you have no incentive to cut corners. You get the best of everything. If I’m going to pay my $5,000 deductible on that boat, it’s going to the best gelcoat shop in town and they’re going to make it like new. There is no incentive to put a little patch on it and call it good. Or just leave it since it’s at the bottom of the boat anyway. Fix it, honey, and make it look great!
Same thing with surgery. We want the best of everything. The best surgeon. The best anesthesiologist. Heck yeah, we want that CT scan. Why yes, we will have him in that beautiful new hospital. Five nurses to help with the case? Sure, why not? Did you know they make dresses these days that fit into the Bair Hugger bed? I didn’t, but I’m doing it now!
We actually had a wonderful surgical experience (special shout out to Dr. Traske Muir and Randall Bready). What is the price? I have no idea and I don’t care. Actually, I know the price. It’s our highest out-of-pocket for the year, and I’m okay 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). Added bonus? The rest of the health care we consume this year is already free! My son tells me he won’t drink milk for the rest of the year in hopes of a fracture just to get our money out of it. By the way, check out this Explanation of Benefits (EOB) statement:
Katie is now the proud owner of a plate and six screws. But four of the screws cost a penny each and two of them cost over a grand. Making screws is good business if you can get it, but you better make the right ones!
Seriously, though, having to use insurance benefits is never fun. I would rather not have to deal with damages, injuries and the hassle of claims. Although I suppose it’s probably not that painful to have your boat out of action all summer when you’re in non-weight bearing status anyway, so I guess if you have to damage both, it’s probably best 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 smooth claims process. However, it rarely happens. 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 impact on a rock.
He claimed it was “dock rust” on the bottom of the boat and thus was normal wear and tear. I have no idea how you hit the bottom of the boat on the dock. It was strange. No amount of protesting or arguing would change his mind. There was no appeal process or customer retention efforts. After speaking with the dealer and the gelcoat dealer, I learned that Progressive boat insurance has really gone downhill over the past couple of years in terms of taking care of their customers at the time of claims. I wish I had asked them before the request. Learn from my mistake. If you have Progressive like us, I suggest you switch. as we did. Only we did it too late. But the hassle factor is certainly a big reason to self-insure when possible.
Insurance is about the transfer of risk. Can 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 might as well pay cash for that surgery, I guess. But it sure is nice not to pay for it (at least other than the health insurance premiums we buy every month). Most importantly, though, it was great to get the best of everything without even having to think about the cost.
There’s value there that I’m not sure I’ve 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!