It’s no fun haggling with your insurance company over a claim. Here’s how advisers negotiate their way to bigger payouts

For starters, savvy advisers guide clients to buy policies from reputable companies. They vet insurers by checking their financial soundness, regulatory record and customer service. 

Specifically, they assess insurers’ credit ratings from agencies such as A.M. Best Company and Demotech. Because insurance companies are regulated by each state where they do business, advisers might contact a state’s insurance department to confirm a particular carrier is in good standing and licensed to sell policies in that state. They might also track customer satisfaction surveys that measure claim service.

Thomas O’Connor, a certified financial planner in Huntsville, Ala., recalls helping a client buy a homeowners policy from a highly rated, reliable insurance company. The client heeded O’Connor’s advice. When the client subsequently filed a claim and received superior service, it reflected well on O’Connor.

“We introduced him to what we knew was a dependable insurance company and we quarterbacked the whole process,” O’Connor said. “Just this week, he called to rave about how the insurance company responded to a recent claim that he filed.”

The real test of an adviser’s value comes when clients sustain a loss and report a claim. Some individuals may not realize that their adviser can suggest ways to extract a larger claim payout.

Faye Sykes, an Atlanta-based adviser, cites an example of a woman in her 40s with three kids. After her ex-husband died, she sought to receive the death benefit from his three life insurance policies.

To her dismay, the widow discovered that two of the three policies had lapsed for nonpayment of premium. Due to a long-term disability, her ex-husband had stopped paying the bills.

Inspecting the fine print in the policies, Sykes found that the ex-husband sought to obtain a disability waiver when he originally purchased his life insurance but never sent in the final paperwork. (A disability waiver frees insureds from continuing to pay premium if they become seriously disabled.)

“It took about 60 days to get everything straightened out,” Sykes said. “I got my wholesaler involved who works with the insurance company and got all the correct documentation sent in.”

As a result, her client ended up collecting $750,000 in death benefits. Left on her own, the widow would have wound up with far less money — from just one of the three policies. 

“She didn’t know what a disability waiver was,” Sykes said. “People in her situation might assume, ‘Oh, the policy has lapsed’ and think they won’t benefit. But you can’t stop there. Having incomplete documentation can hold things up.”

Promptly filing a claim almost always works to your advantage, regardless of the type of insurance. But it pays to confer with your adviser who can work with you to analyze the policy provisions.

“Notify your insurance company as soon as possible of a claim, but first know your deductible,” said Eileen Freiburger, a certified financial planner in Sebastopol, Calif. For instance, it may not make sense to file an auto insurance claim for a car break-in or stone that hits a windshield, she says, because the coverage might not amount to much — and your rates can increase later.

Filing a long-term-care insurance claim is time-consuming and complicated. But delaying the cumbersome process can work against you and your loved one who receives the care.

Echo Huang, a certified financial planner in Plymouth, Minn., urges policyholders not to dally when it comes to gathering a doctor letter and completing other forms needed to submit a long-term-care insurance claim. Many policies impose a waiting period that typically ranges from 30- to 180 days before benefits kick in.

So once you know that the policyholder cannot perform at least two of six activities of daily living (such as bathing, eating and dressing), start to assemble the documentation to file a claim. “If you don’t report, no one knows when the start date is,” Huang said.

Some advisers are accustomed to helping clients recover from disasters. That’s especially true if they live in a high-risk area prone to severe storms or wildfires.

Based in California’s Sonoma County, Freiburger is familiar with the destructiveness of massive fires. She says that after a total loss, a key question for policyholders is how to ensure they receive a fair settlement that fully reflects what they’re entitled to collect on their homeowners policy.

From her experience advising clients, she has found that insurance companies might dangle a seemingly generous amount to advance more quickly toward a settlement and close the claim file. She recommends that insureds proceed with care.

“Some insurers might say, ‘We’ll cut you a check for 50% or 75% of your contents coverage so don’t bother itemizing’ [the contents you’ve lost],” Freiburger said. But that settlement figure may not be enough if a home had custom features along with antiques, art and jewelry. 

Diligent homeowners maintain detailed records and receipts of contents and architectural enhancements so that they can accurately tally the value of what was lost.

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