If People Will Do This For Insurance, What Will They Do If SOPA Passes?

People of the Free World

In the history of mankind, there have been too many cases to count of people being dishonest with each other and themselves.  Maybe it has been out of fear, sometimes out of necessity, or just out of human nature.  But there are those who take things too far.

Insurance fraud comes in all different forms.  From you not telling your insurance agent that you have wet rot in your roof when they are quoting your home, or “neglecting” to tell them that you have a family of dobermans, it can all be considered a form of committing fraud against the insurance company.  These types of fraud are called “material misrepresentation” and your insurance company can potentially flat cancel your policy for it, leaving you with no insurance.  Taking things a step further, if that wet rot ends in your roof collapsing and you call the insurance company to put in a claim, you must have nerves of steel.  The claims adjusters will be there to assess the damages.  If they find that you have rot, then find out you knew all along, bye bye insurance policy, and hello hefty fine and prison time.

Too Far…

Although it seems like an easy thing to avoid by simply telling the truth, some get it into their heads that insurance companies can be easily tricked; like stealing candy for a baby.  Those people would be wrong.  And there are even some who take things to the point of no return and end up like some of these people:

Case 1:  Over the limit, under arrest.  This case of insurance fraud proves that it isn’t just the Private Sector that is willing to take things to the extreme.  Taking advantage of the benefits provided by insurance coverage is acceptable, but for this Police Officer in Los Angeles, CA, he couldn’t wait any longer.  Telling his superiors and fellow officers that he had been shot by a man, while wearing his protective vest, the department scoured the city, shut down roads and closed in schools to find the assailant.  When there was no sign of him, all eyes went back to the Police Officer.  Turns out, he had faked a gun shot wound so that he could receive paid time off from his workers compensation plan.  Doesn’t look like he’ll be sitting anywhere but the back seat of a Police Cruiser after he serves his four year term in prison.

Case 2:  Treat others the way you would like to be treated.  In Baltimore, MD, a pastor made a good friend with a man who was blind and disabled.  Unbeknownst to this man, the pastor took out a life insurance policy on him to the tune of $1.4 Million.  But the story doesn’t end there.  The pastor stole $50,000 from his own church for one expense we’d never expect.  He hired a hitman with that money and had the blind man shot dead in a park bathroom.  Luckily the hitman was careless and the murder lead right back to the pastor.  He received a life sentence in prison.  I hope he finds God.

Case 3:  To get to the other side…  Surely there have been some terrible souls in history, but this man could surprise even the Devil.  This past year, needing money to pay off his debt, a man in Arizona decides he is going to burn down his home for the insurance payout.  He might have gotten away with it if there weren’t witnesses to his crime.  So he went across the street and executed two witnesses.  Surely he thought that he was “home free” but there were children who might speak up about his wrongdoing, so he kills the three of them to ensure they would keep their mouths shut.  Needless to say, when the Police found about all of this, he was put on trial and given the death penalty.  Money makes people do some crazy things, but this one tops them all.

Take a Deep Breath

So you see, it could be as small as hiding your puppies, to conceiving a plot to steal the family jewels for reimbursement, people do these things all the time.  But just know that if you think that you won’t get caught, think again.  Insurance companies are much more intuitive than you expect, they just expect that you as the insured will do the right thing.

The Concerned Insured: Garagekeepers Liability Insurance

Insureds Needing Guidance

Concerned Insureds

Just today, one of our readers asked a great question about a situation they found themselves in recently.  They had posted it in our comments section, and I felt that a response to this question should be made more public than in a comment response.  User donaldduck (I love Donald Duck) asked this question:

“Dear Dgermain,
Just found out that Valvoline put in transmission fluid in my brake system instead of break fluid. Due to this mistake, every part that has come into contact with transmission fluid needs to be exchanged (apparently transmission fluid causes all the plastic/rubber parts to swell). Is there any form of insurance that covers mechanic screw-ups?”

And it is a fantastic question indeed donald (can I call you donald?)!  Some may think that because they have an auto policy, that they are covered from nearly any form of loss.  There are a few exclusions for an auto policy, but common types of losses are mostly covered by the policy.  But what happens when you leave your car with a mechanic and they damage your vehicle?  Will your auto policy cover those damages?  No.

Don’t Worry, The Good Part’s Coming

Wait, what?

It’s ok though!  Don’t fret, because there actually is coverage for this sort of thing, it’s just not covered under your policy.  The reason being that the mechanic has his own policy called a Garagekeepers Liability Insurance Policy.  This policy will cover damage to vehicles that are in their care, custody or control, and they do not need to have ownership for the coverage to apply.  Let’s say there is a fire on their premises and that fire happens to spread to your soft-top convertible, putting a large, unattractive hole in your roof.  Their insurance will cover that loss because your vehicle is in their care, custody and/or control.

In a garage keepers policy, the insured’s are the parties that will be held liable in the event of a loss.  So if a mechanic accidentally puts transmission fluid where brake fluid is supposed to go, not only should he have had that second cup of coffee, but the damage to the vehicle will be covered under the mechanic’s garage keepers policy.

Much Thanks Donald!

So you see, just because a loss isn’t covered under one policy, doesn’t mean that it is not covered under another.  This is why flood is excluded from a homeowners policy, because flood insurance can only be offered through the Federal Government.  So, donaldduck, I hope this answers your question.  My advice would be to speak to the mechanic and tell them exactly what you’ve told me.  Make sure they put in a claim for the damages, and their insurance company will help with the rest.

Thank you very much for your question, it’s always fun writing about something that someone actually needs help with.  And tell your friends that if they have any questions, to let us know and we’ll do our best to answer them

And for you Donald, stay classy:

The Concerned Insured: Raise it or Risk it?

The Market Is Changing

The insurance market is constantly in a state of flux.  Risk rating goes up or down depending on how many claims are paid out, competition between rivals in the market, and changes in the environment.  To counteract premium increases to insureds, insurance companies must be prepared for the market and buyers incentives to change.  But sometimes, it’s not so easy to predict what kinds of changes are going to occur and that can leave some insurance companies frazzled, trying to keep their processes on an even keel.

The Soft Side of Insurance

Insurers describe the insurance market in two different types:  Soft markets and hard markets.  A soft market, in simpler terms, is where the number of buyers of insurance products is down, and there are many more sellers of products in the market.  There are more sellers because people are less willing to buy new products or change their current policies, and this has insurers actively looking for new business.  Competition between insurance companies tends to increase during this time which has buyers looking at more options to place their business.  Because these insurers are looking to acquire more business to drive sales, underwriters will usually accept more risks than usual and better rates.

What does this mean for the insured?  Well generally, this is good for buyers of insurance products.  Premiums are lower, and as a result, this allows insureds to have better coverage at lower prices.  Insurance companies are competing with one another to offer better rates as a buyer incentive, so insureds really benefit from a soft market.

Then Things Get Hard

Things can’t always be the best for the insured, however.  Insurance companies need to make money so that they can continue to provide valuable coverage to buyers.  When there is an influx of insurance claims paid out by many insurance companies, we start to see the market shift gears.  Underwriters start becoming more stringent with their rating policies,  and this makes it harder for previously insured risks to be available at such low prices.  This usually happens after a natural disaster that has insureds looking to their insurance companies for reimbursement. 

After a tropical storm has passed through an area and done some significant damage, people start to buy more insurance and the coverage becomes more in demand than usual.  But, because so many claims have been paid out, in order to balance things out, insurance companies become less willing to offer coverage for certain risks.  Currently insured risks come under review and are re-evaluated to meet revised standards of underwriting.  When there are more buyers in the market than sellers, this is evidence that we are experiencing a “hard market.”

What does this mean for me?  Generally when we see a hard market, premiums increase and insurance companies start to balance out to equilibrium.  They experience less losses because they are insuring less risks, and profits increase.  Then, as insurance companies yield more profits, underwriting guidelines begin to shift again, and the cycle starts to revert back to a soft market.

So Where Are We Now?

We have gone through a long period of a soft market.  But after various natural disasters and high numbers of claims being paid out, experts are starting to see a shift in the cycle.  A Hard market is in the making and it is the duty of insurance brokers (independent agents) to inform their insureds about their options as we travel into the future.  We know that it is ludicrous to believe that buyers will be willing or even able to handle an increase in their insurance policies.  But although it seems there won’t really be a choice, in reality, there is.

The choice is ultimately yours.  If a hard market really is on the way, then you can choose to wait it out and take the premium increase.  But if you cannot afford the first option then this is where a discussion with your agent comes into play.  You may not be willing to take an increase in premium, but how about an increase in risk?  Changing your deductibles or coverage may leave you susceptible to more risk, but it can help you keep insurance within your budget if things start to change and the market begins to harden.  Looking at some extra coverages and either reducing their limits or temporarily eliminating them is something that speaking to your agent about will prove beneficial, or at the very least, informative.

Don’t Be Scared.

If you feel I have thoroughly frightened you and given rise to a new worry in

A "Cat" on the Back

your life, just take a deep breath and relax.  It’s unsure when a hard market is near or far, but it’s good to be prepared.