Archive for the ‘Insurance’ category

Property Pitfalls: Avoid Brinks and ADT like the plague!

January 5th, 2010

This is the second installment of Property Pitfalls, a series where I discuss some of the hazards out there waiting to ensnare unsuspecting homeowners. Today’s topic: Security system contracts from the big name national companies.

Crime is all over the headlines, and if that wasn’t enough of an encouragement to install a security system for your home Brinks/Broadview Security and ADT, the two big national alarm companies, put out plenty of advertising to remind you just how vulnerable you are. But think twice before you sign a contract with one of those big companies, because you may have trouble getting out of it and may ultimately end up with nothing to show for it.

When I was young and stupid (about five years ago) I signed a contract to have an alarm installed and monitored by Brinks Home Security, which has since been renamed Broadview Security. The sales pitch sounded good: they would install a system in my home free of charge if I allowed them to monitor the alarm for a monthly fee, and a portion of that monthly fee would be offset by a discount on my homeowners insurance. So I stupidly signed a contract with them, and only later realized the many gotchas in the deal:

  1. By signing a contract, you are locked into a contract with them for three full years, and if you fail to notify them in writing that you want to cancel service your contract will be automatically renewed for an additional year at the end of the current contract term. This isn’t like your cell phone where you can go month-to-month after the contract expires, and trying to break the contract at any point will subject you to an avalanche of fees.
  2. The free system they offer to install is likely completely inadequate for most homes. What is included in the standard install is a single keypad, two door or window sensors, and a single motion detector. If you want other doors covered or motion detectors installed, it will cost you extra.
  3. The equipment you are “buying” isn’t really yours! You’ll notice in the fine print of the contract that the alarm system installed in your home is property of Brinks. If you cancel service, they can request that equipment back. Even if they don’t request it back, the control panel and keypads are proprietary and will not work with any other alarm system. If you want functioning alarm equipment, you’ll either need to resign with Brinks or pay someone else to install new equipment in your home.
  4. Alarm monitoring through Brinks is much more than you can get through other providers. Brinks current monitoring rates start at $31.99 a month. We found another highly rated provider in the Houston market that provides service for $16.99 a month with no contract, while some online-based providers charge as little as $8.99.

Your best bet is to find a locally-based company to install and monitor your alarm. You may pay a little more for the equipment, but you will ultimately have a functioning system without being locked into a single provider. While there is nothing technically illegal about what Brinks/Broadview and ADT are doing, this is ultimately a raw deal for consumers. Whatever company you go with, be sure to get recommendations from friends, research the company with your local Better Business Bureau, and make sure their monitoring service is UL certified (this is what qualifies the monitoring for a discount on your homeowners insurance). And please, please, READ THE CONTRACT IN FULL!

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Posted in Home Ownership, Insurance, Scams

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Free insurance coverage from financial providers

January 25th, 2009

It is likely you have seen the solicitations in the mail from your bank or credit card company offering you free insurance coverage, or perhaps you threw them out thinking they were worthless junk mail? If so, you are missing out on a worthwhile freebie!

Here’s how it works: your bank sells its customer list to an insurance company, who then sends an offer to the customers offering a small amount of free insurance coverage (usually $1,000-2,000 of accidential death and dismemberment or term life coverage) that is supposedly paid for by your bank. In the same letter, it provides you the opportunity to purchase additional coverage with the premiums deducted directly from your account. If you read closely, if you don’t elect any additional coverage you owe nothing. There isn’t any catch, except that in most cases you must stay a customer of the bank to keep your coverage. And yes, the policies are real and you receive a policy statement confirming your coverage.

I have recently received $1,000 in life insurance coverage through Discover Card, $2,000 in AD&D coverage from People’s Trust Federal Credit Union, and today received an offer from Chase for $1,000 in AD&D coverage. All of these were completely free! My wife also got one year of $25,000 in term life coverage from a mailing to members of the Texas Society of CPAs, also for free.

While these amounts don’t come close to meeting our full insurance needs, I’m sure my family would have no objections to an extra few thousand dollars if something should happen to me. That could be a few mortgage payments or something to put towards funeral expenses (I certainly know I would have loved for my dad to have had some of these to cover the $3500 of his funeral bill left over after liquidating his assets). If it costs us nothing, why would I deny them that benefit?

So the next time you get something from your bank or credit card company that looks like junk mail, take a closer look. You may be throwing free insurance coverage into the trash!

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Posted in Insurance

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Get a life! Financially, that is…

June 18th, 2008

There was an interesting series of tips over on CNNMoney entitled Get a Financial Life. It lays out a series of tips to get your financial house in order in 7 short weeks, with one task per week. Here are their tips, and my thoughts on them.

  1. Talk about your goals with your partner. If you are married or otherwise attached, your finances are a team sport. You can’t get very far if you and your spouse are running towards different financial goal lines. So talk about what you want and make sure you are on the same page.
  2. Build an emergency fund. Another good tip. The recommendation is three months of living expenses in good times, six months in bad. Just remember that your living expenses do not necessarily equal your salary. Hopefully you are frugal and six months of living expenses is a much smaller number than six months of your earnings, but if you have trouble saying no this number may actually be higher than your earnings.
  3. Get life insurance, in the right amount. According to the article, you should have life insurance equal to 5 to 10 times your annual salary. The more dependents you have, the higher the number should be. However, if you are single and have no dependents remember that the purpose is mainly to replace income, and if no one else is going to need that income after you die you don’t really need life insurance. Just make sure to have enough to cover your funeral expenses so that your family doesn’t get stuck with a bill!
  4. Use online billpay and automatic payments. I’ve written before on the virtues of automatic payments on credit cards, and many other bills can be paid by automatic draft from your checking account or credit card as well. Just make sure you are reviewing those bills for unauthorized charges, and if the payments come from your checking account be sure to write them down in the check register and make sure you have sufficient funds to cover the payment.
  5. Simplify your 401k with target-date funds. OK, this one I will disagree with slightly. I find that target-date funds typically have slightly higher management expenses than the funds that make them up. If you are willing to keep up with it, I would recommend just buying the funds individually. This also allows you to adjust the riskiness of your portfolio to suit your individual tastes.
  6. Automate your investments. I completely agree. The biggest investment challenge for a lot of people is just doing something. Setting up automatic investments allows you to set it and forget it. If done in terms of dollars, you also get the benefit of dollar-cost averaging.
  7. Get down to a single credit card. OK, I will disagree on this one. If you use automatic payments as noted in #4 above, I really don’t see a point to limiting yourself to a single card. This is especially true if you have reward cards that give different percentages for different types of purchases. At one point I carried one card for gas (5% reward), one card for restaurants (3% reward), and one more for everything else. Now I am mostly down to just my Citi AMEX Platinum that gives 5% on some purchases (gas, groceries, drugstores) and 3% on everything else, and my Citi Dividend card with a 1% reward for use at places that don’t take AMEX.

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Posted in Basics, Credit Cards, Insurance

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A trouble-free experience with insurance claims – a sure sign of the Apocolypse?

June 3rd, 2008

A few months ago I had a little incident in the parking garage at one of my clients. I was coming back from lunch in my car and came upon the gate already open. There was no other car in sight, so I assumed it was stuck open (the garage is also opened to the public quite regularly to accommodate events at the neighboring Lakewood Church) and drove through without swiping my badge. Well of course as I was driving through the gate arm comes down, totally scratching up the paint on the panel right above the driver’s side door.

I almost just accepted it thinking that it would be more trouble than it was worth to pursue getting the property management to pay for the damage, but I decided to go ahead and file an incident report and pursue a claim. Although it took the property management company a while to forward the claim information to the insurance company, the insurance company paid the claim without much hassle. I just had to get a written estimate and fax it to them, and they sent me a check for that amount plus an allowance for a couple of days of rental car charges. The biggest delay was getting the car out to a body shop to get the estimate.

I have never been a big fan of insurance companies. If you need evidence why, do a Google search for stories of how several major insurance companies are still trying to screw homeowners in South Louisiana making claims for Katrina damage. But in this instance I don’t have much I can criticize. I’m just happy to have my check.

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Posted in Automotive, Insurance

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Yes, your insurance company IS trying to screw you!

December 6th, 2007

Have you ever sworn that your insurance company is simply out to screw you? I mean, you seem to pay through the nose for ever decreasing levels of coverage, and then when you need to file a claim they seem to be incapable of paying you fairly for your loss. Well, it seems this is by design, according to this lengthy article from Bloomberg. It is long, but certainly worth reading.

The article details how insurance companies have rigged the claims process to avoid paying claims at all costs. According to the article, it all began in the early 1990s when Allstate engaged management consulting firm McKinsey to help streamline their claims process. McKinsey came up with several strategies for Allstate that were quite unfriendly to consumers. One was called “Good Hands or Boxing Gloves”, an obvious play on Allstate’s longtime slogan, which called for Allstate to initially respond to a policyholder’s claim with a lowball offer. If the policyholder accepted the offer, they should be treated with good hands. If they didn’t accept the lowball offer or hired a lawyer, Allstate should put the boxing gloves on and fight back.

Another strategy from McKinsey was “sit and wait”, which directed the company to discourage customers by delaying settlement payments and stalling court proceedings. The idea is that the longer to insurance company can avoid paying out, the longer they can hold the money and make money on their investments. As an added bonus to the insurance company, customers often are worn down into dropping their challenge as either their patience or finances without a settlement are depleted.

Although Allstate may have started the trend, most major insurance companies now employ some or all of these tactics. Most are now also utilizing specialized computer programs some say are rigged to automatically lowball settlement offers.

Unfortunately, there probably isn’t a whole lot you can do about this. It seems almost everyone does it, so being able to avoid these practices is probably near impossible. Your best bets are to know what your policy does and doesn’t cover and keep very good records detailing your possessions in case of loss. You may also want to consider enrolling in the prepaid legal benefit at your work, if it is offered, so you are prepared to fight the insurance company when you do finally make a claim.

Crap like this is why I’m not scared by the sales tactics of traditional insurance agents who claim you won’t get good service from non-traditional companies like Progressive and Geico. Even the traditional insurance companies are going to try to screw you, so you might as well go with the financially stable company with the best rates for the coverage.

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Posted in Insurance

My car insurance rates are too high! Not anymore thanks to Geico!

September 24th, 2007


As Americans we are the target of a full-on assault from a yuppie caveman with a chip on his shoulder, whiny 50s-era dolls, and a cute little gecko who talks with an Australian accent. Unless you have been living in a cave, you surely have seen the numerous advertisements for Geico Auto Insurance, promising that in 15 minutes you can save 15% or more on car insurance. And if you are like me, you have always ignored the ads.

Well, I got sprung into action when I added our 2007 Honda Accord to our existing policy with Allstate. These greedy bastards wanted more for coverage on this vehicle than they did on my big 2007 Honda Pilot SUV, which is worth probably $10,000 more than the Accord. And that is with having one of the vehicles as a pleasure vehicle! In all, Allstate wanted $807 for full coverage for six months on our two vehicles. Seeing as my wife and I are relatively low risk (no tickets, no accidents, college-educated professionals, good credit scores, over 25 and married), decided to shop it around with Liberty Mutual and Geico. I chose these two because they have special arrangements with professional organizations I belong to.

Using the Texas Society of CPAs rate, Liberty Mutual came back higher than Allstate. So it was on to Geico, and using the Institute of Internal Auditors rate, they quoted us at $616 every six months with a higher level of coverage. Even taking into account the 15% discount I get on my Allstate homeowners insurance, this is a huge difference. Needless to say I switched and me and the gecko are now good friends.

This is my honest experience. I have no affiliation with Geico, no advertising banners for them, no employment relationship, nothing. I don’t even own Berkshire Hathaway (Geico’s parent company) stock, although I’d like to. This is just to share my experience and remind you if you haven’t shopped your car insurance in a while, you could be missing out on significant savings.

Now to see if they take away the multi-policy discount on my Allstate homeowners policy for the remainder of the policy term…

Note: This post is sponsored through PayPerPost (although not by Geico, as that would be a conflict of interest). Check out the offerings of the post sponsor using the following links.

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Posted in Automotive, Insurance

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