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Making Sense of Insurance Companies

April 08, 2005 16:20

The only time I've used my insurance in more than 10 years is when I get pulled over and need to show that I have it. Even that doesn't happen TOO often. So needless to say, my insurance company likes me and I rarely have any problems. Normally, I pay my bill once every three months, in January, April, July, and October. Actually, I officially pay it in January and July, but I split the payments so I make a half payment each of the 4 months. ANYWAY, a couple weeks ago I make the April payment in person, with cash, like I always do, and while I was there, I decided to mention that I had a new house now and therefore a new address and they can now switch my mailing and residence address to Denison. Of course, by moving to Grayson county, my insurance premium went down by about $40 a year, so it's all good.

Today, I get a bill in the mail from the insurance company for another half payment, due on the 5th of May. Naturally I call them up to find out what the deal is. Get this, when I moved to grayson county, the premium dropped instantly, so they made a prorated adjustment to my premium. However, the system that records my payments apparently runs a couple days behind the system that decides what I owe them. So while they recognize and even listed the fact that I made my payment, they still showed that I owed them the same payment, minus the discount for now living in a different county. I was told I could just throw that away. Maybe I'll call them in a couple weeks JUST to be sure. I'm actually supposed to be sent a $12 refund. And no, they can't just credit it on my account, they must mail me a check for an entire $12. Better than the $5 one they sent me once. I was actually able to talk them into once not sending me a check for 50 cents.

So while we're settling this issue, they ask me if I want to get renters insurance. Well, seeing how I actually own a house, renters insurance doesn't make much sense. And as of a few years ago, State Farm no longer writes new homeowners policies in Texas, due to all the black mold claims. Well, they MIGHT write me a policy in June if I have renters insurance with them. So we start talking numbers on that. Turns out, if I get the absolute minimum renters policy, which is like $10000 of coverage, easily more than covers what I own now, I get a 15% discount on my car insurance, and that discount just about equals the cost of the renters insurance. So now I have more insurance for the same money. Yay.

Another thing that makes no sense. So far, the insurance companies that write homeowners policies write it based not on the actual value of the house or what I paid for and put into it, but what it would cost to build it new. When I checked with Allstate a while ago, it turns out that in order to insure my $21000 house I would need to get a $123000 policy. Apparently, that is what it would cost if they had to build my house new today. I'm figuring $36000 will be the total invested in the house once I consider it done, and at that point I would be able to sell it in the $60-80k range, based on the going rate for houses in my area of similar size and good condition. Yet, even once my house is completely rennovated, it'll still be insured for at least $50000 more than it's worth, and I have no option to lower the coverage. This means, if my house burns down, or a tornado comes through and flattens it, I make a significant profit. While I would never entertain such notions, I can see where less scrupulous individuals might see this as a glorious fraud opportunity. Insurance, the only form of gambling where you win when bad things happen.