Deductible Question

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PostPosted: Sat Sep 18, 2010 3:02 am   Post subject: deductible ?  

The very first question at the very top of this page, to which the reply stated that the question wasn't very clear and that you weren't sure as to what was being asked; then I ask you to PLEASE read my question(s - 2) thoroughly and very carefully? it is extremely important your answer is very clear and correct, as much as possible, OK? Thanks.

1. In that question, back in 2008 someone asked:

If the deductible is automatically deducted out of the TOTAL claim-amount by the insurance company BEFORE they issue out the first check or partial-payment for the claim, if indeed the deductible was retained or deducted by the insurance co. from the whole claim-amount, is one suppose to pay ANOTHER, SEPARATE, same deductible-amount TO THE CONTRACTOR, after the job is done? Can the contractor say we STILL have to pay the deductible, EVEN AFTER the insurance co. has ALREADY deducted it from the first partial-payment of the whole claim-amount and IS documented as such?

2. Or, when the contractor himself takes care of the insurance-claim on behalf of the policy-holder, to do a job, does the insurance co. expect the contractor to pay it (deductible), and if so, does the contractor have to include, as a side-charge, the deductible-amount, to the amount of what the job-costs were or will be for the repairs?

Very plainly put, if the insurance deducts the deductible and the partial-payment-check is already short that deductible-amount, does the contractor have the right to say we owe him the deductible AGAIN? I hope this is a bit clearer?

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PostPosted: Mon Sep 20, 2010 2:15 am   Post subject:   

Hello there! Thanks so much for the detailed reply, I and many, many others really appreciate it very much, cause this kind of answers are what many of us need, but questions still remain. The reason I asked these questions is not because I'm trying to short-change the insurance co., not at all, ok? I do understand I have to pay the deductible out of MY own pocket, but again, the reason I have these questions is because of what the adjuster told me.

He said that, after I have the repairs done, I would have to pay the contractor the check or money I receive in the mail from the insurance co., as an initial or partial-payment from the total claim for the repairs; which I also totally understand, and will have to do. But, the adjuster ALSO said, that, if I would NOT pay the contractor the deductible out of my pocket, but just give him the money from the first initial-payment, to where the contractor’s bill would show I did NOT pay it (deductible), THEN, the insurance co. would just take it upon themselves to just deduct it from the SECOND check, which would be the recoverable amount-check, minus the deductible, if I did not pay it to the contractor. This point I also totally understand…if it was actually done that way?



The thing I do not understand about all these, and which is confusing me, and certainly to many other people out there, is, why the adjuster also said, that, if I didn't pay the deductible, along with the first check from the insurance co., to the contractor after the repairs are done, I would THEN end up paying DOUBLE the deductible-amount. He said that very plainly; that the insurance co. would deduct the deductible from the SECOND CHECK (the recoverable amount), as I stated before, BUT, that I would STILL, STILL ALSO have to pay the contractor ANOTHER same deductible-amount out of MY own pocket, which would then make it DOUBLE, and so I would end up paying up $1000 (two deductibles) instead of just $500; one from my pocket, and a second one taken out by the insurance co. from the recoverable amount? Those were his EXACT words to me, which really threw me off completely…and freaked me out!

I just find that to be very confusing, unreasonable, and unjustifiable. That’s why he even, very adamantly at that, recommended I should just go ahead and pay the contractor the deductible out of my own pocket, along with the first check which I would receive from them. I told him it was a good thing he had informed me about that cause I hadn't known that before, so I told him that made a lot of sense to me and I told him I would do just that; just pay it right away.

.

I still don't get THAT particular part where he said: I would end up paying DOUBLE the deductible. So, that's why I ask: why would YOU say the insurance co. does NOT in actuality retain the deductible? I don’t get it, for now it seems to me the adjuster, after telling me ALL that, (recommending to just pay the contractor, otherwise I would end up paying double), did not give me the opportunity to do so, cause, again, according to the paper-work, the deductible WAS INDEED ALREADY DEDUCTED, when he in turn said it would be deducted form the SECOND recoverable-check, but ONLY if I did not pay it to the contractor initially out of my own pocket.



Please bear with me; you’ll be helping millions of people out here in la la land understand this thing about the deductible for any insurance-claims they may have or are planning to file…Thank you so much.



To maybe further help you, and many others who may have the same question(s), and who may also be reading all these understand even more, let me type some numbers for you ok?



1. Let’s say the documentation received from the insurance co. shows the total claim-amount, which let's say was $10,000 dollars.

2. The next line shows the depreciation-amount, let's say that is $2,000 dollars, which would also be the recoverable amount and which would also translate into a SECOND CHECK being sent by the insurance co. to the claimant, ONLY if the work is done for the total claim-amount of $10,000, and NOT less…that is understood.

3. Now, the remainder which would be $8,000 AFTER the depreciation, and which would be the first partial-payment for the repairs, now ALSO shows a SUBTRACTED-DEDUCTIBLE of $500 (assuming the deductible is $500) from the $8,000, and so the check received in the mail would now be for $7,500 dollars instead of the $8000. The total $10,000 received, IN THE END, would be my total claim-amount of $10,000, LESS the deductible of $500; I get that.

But now, if the deductible was NOT in actuality retained by the insurance co., as you say, to where on the paper-work it clearly shows they DID INDEED retain it out of the $8000, after the depreciation, why do you say I still have that deductible in my bank account? If it SHOWS, as I've already stated and explained; the insurance co. ALREADY deducted it from the FULL claim-amount, and it PLAINLY reads on the paper-work that they DID indeed subtracted it, why is it then, that one STILL has to pay the $500 deductible to the contractor out of our own pockets, which to me seems like I would be paying it a SECOND time. It shows exactly what the adjuster said I would end up doing, but only if I didn’t pay it up- front, and again, he said if I didn’t pay it up-front, the insurance co. would subtract it from the SECOND check, not from the first one. I just don't understand that particular point, and I'm very, very sure very MANY people don't either. If it says on the insurance documents that they subtracted the deductible out of my TOTAL claim-amount, why do you say they DON’T REALLY retain the deductible?



We out here just need to hear from professionals or insurance-claims-knowledgeable persons like yourself explanations which you are very intelligently and eloquently able to give us, and which are very GREATLY appreciated, believe me.



So again, and to close, that particular part where he (adjuster) said I would end up paying DOUBLE the deductible, is what I do not understand, since they already deducted it from the first partial-payment-check, which would be from the total amount one qualifies for on the claim, and since I, myself, just like millions of other people also do, have been paying my premiums, on time, for many YEARS, I would only assume and expect the TOTAL claim-amount, less the deductible only, would be the amount we would be receiving in the form of two payments; a first-payment, to which, I would give to the contractor, and then, from out of my own pocket I would just pay the deductible MYSELF and which would also be added to the first check to the contractor, then just wait for the second check which would be the recoverable amount, then also pay that amount to the contractor to finalize and close the contract for the repairs.

My dear sir/mam, is that thing about paying DOUBLE true? AGAIN, THAT’S WHAT THE ADJUSTER TOLD ME! Can that be done, is that what’s being done by both, the insurance co. AND the contractor? Is it Legal? I welcome others to explain this questions according to how they understand this damned insurance-deductible-dilemma. If I was in a real good economical standing…like, for example: wealthy, I wouldn’t mind paying double, or even a triple deductible, cause I wouldn’t be worrying about, or looking into details like these, but since I’m not; that’s why I’m asking and need to know, as much as possible, the intricate details of this monstrosity of a double-payment-question, for those details shall dictate as to whether or not I, (as many others) will be able to fix some other thing at home which needs fixing, and which is the whole point to my question.

Thank you so very much, God Bless, and best regards to you, and all others out there who were willing to read my long inquiry, and who are able and willing to reply to it. M.B. El Paso, Tx.

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PostPosted: Mon Sep 20, 2010 5:10 pm   Post subject:   

People always seem to look at the deductible the wrong way.



Your claim

$10,000 - replacement cost (agreed price to repair)

$2000 - in depreciation

$500.00 - deductible



You get $7,500 check to get the work started.

Once the work is done you get the holdback amount $2,000

You have now received $9,500.



Now if the contract between you and your contractor is for $10,000 to do the work, you owe them everything the insurance company sent you plus $500.00. Now if the contractor only asks for $9,500. you just turn over the money the insurance company sent you.



Your contract with the insurance company is for a $500 deductible. They subtract that from the payment to you (once). If you pay your deductible to the contractor is between you and the contractor.



What this adjuster was talking about 2 deductibles...not sure. they will only take one deductible per the policy.



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PostPosted: Wed Sep 22, 2010 12:30 am   Post subject:   

I posted the following response to the same questions posted under a different thread in the Auto forum



Quote:
I still don't get THAT particular part where he said: I would end up paying DOUBLE the deductible




I'm not sure anyone said anything like that to you, and yet it could easily be what you thought you heard. I wasn't there, so I'm not going to guess one way or the other what the reality of the communication was.



Quote:
But now, if the deductible was NOT in actuality retained by the insurance co., as you say, to where on the paper-work it clearly shows they DID INDEED retain it out of the $8000, after the depreciation, why do you say I still have that deductible in my bank account?




First, a bit more explanation.



I think you are confusing the term DEDUCTIBLE and RETENTION as if they are two different things. From my side of things, I see them as essentially the same thing, but I'm pretty sure you are comparing them as if they were apples and oranges. When I teach this stuff, RETENTION is what an insured agrees he will be on the hook for in the event of a loss. DEDUCTIBLE is just another word that means the same thing. SELF-INSURE is yet another term that describes both.



A person who is exposed to a risk that could be covered by insurance, yet chooses to not be insured, is SELF-INSURED, and has decided to RETAIN 100% of the risk of loss, normally understood to be a financial measure. Insurance companies, when they issue a policy, are not so much retaining anything, as much as simply agreeing to pay your loss. They know, statistically, that your risk of loss, to them is small, even though it is 100% to you. That's what makes insurance affordable.



Doctors and lawyers sometimes form "RISK RETENTION GROUPS" where they pool their money, agreeing to cover each other's losses up to a point. The point at which the coverage starts is where each person's own retention (or deductible) ends, perhaps $5000. Then they agree to cover each other's claims up to $100,000 beyond that point. If the total claim exceeds $105,000, the group has usually purchased a STOP LOSS contract with a "retention" (or deductible) of $100,000, and that contract agrees to pay all claims above that $100,000 amount, perhaps to $1,000,000 or more. RETENTION, then, is most easily understood to mean either a DEDUCTIBLE or to be SELF-INSURED.



In a homeowner's policy, the word "retention" is usually not found (too technical), but the word DEDUCTIBLE is. And if something is deductible, it won't be included in a claims payment -- it's a number with a minus sign in front of it. The homeowner is SELF-INSURING to the point at which he feels comfortable RETAINING the first dollars of the loss, maybe $500, maybe $1000. Few homeowners carry higher deductibles than $1000, unless they are folks with multimillion dollar estates, and then they might have a $10,000 deductible in order to reduce their premium.



Now, on to your questions.



When the insurance company values a loss, and writes the claim check, they are not RETAINING anything. They are only paying what the contract entitles them to pay. If they are obligated to pay $10,000 less the deductible, then, as I think you agree, they will send a check for $9500, if the deductible is $500. That remaining $500 is (supposed to be) in your bank account waiting to be paid to the contractor to fulfill his invoice for $10,000. That's your "loss reserve" account.



That's what I meant when I first wrote about having the money in your bank account. If you instead wanted the insurance company to pay 100% of all your losses, they would charge you a much higher premium. As a result, you won't have the money in your bank account, since you paid it to the insurance company (but, then, you won't need it). I realize a $500 deductible doesn't lower your premium by $500, but the $75 or $100 annual savings can be set aside and allowed to accumulate until you have the $500 in hand, waiting.



I am a bit confused about the business of "paying a double deductible" with the second payment that you ask about. I think I have figured out the explanation, but, please correct me if I have misunderstood you.



If you have a $10,000 loss, and the insurance company says, "We'll cover $8000 minus $500, initially, and will pay the balance when the job is complete," then they will pay a total of $9500 on the claim -- same example as above. So they send you an initial check for $7500, and if you only give that amount to the contractor, he will give you a balance due invoice for $2500. But the insurance company is not going to write a check for $2500, because $7500 and $2500 equals $10,000 and they already told you the most they will pay for your loss is $9500.



They are going to write the second check for $2000, since you still have not coughed up your required $500 to the contractor, as you agreed to do when you purchased your insurance policy. They have not "charged" you a second deductible (or even "retained" a second deductible), just like they did not "charge" you a first deductible, you have yet to pay any deductible to the contractor in the first place.



If, on the other hand, you pay the contractor the $500 at the same time you hand him the insurer's check for $7500, he will give you a balance due invoice for $2000, and your insurance company will write a check for $2000, not $1500. The total they have paid will be $9500, the amount they told you they would pay.



Now, having said that, if the contractor will agree to do the job for $9500, even though he has invoiced you for $10,000 total, then you don't have to come up with the $500 out of pocket. The contractor takes the "loss" on that. Given the fact that most contractors are starving these days, economic stimulus or not, I wouldn't doubt that you could find one who would make that agreement with you.



Deductibles in health insurance work the same way, except that you normally must "satisfy" the deductible before the insurance company even begins paying claims. So in a homeowner's policy, and insurer could say, although they don't, "We will pay our share of a claim for a covered loss only after you have paid the deductible stated in the policy specifications." You don't pay the deductible . . . they don't pay the claim.



Hope this helps. If you have something you can scan and email to me, please do. That might help to clarify things. You'll find my email address on my personal page.



Original thread: http://www.ampminsure.org/start/about14368.html


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PostPosted: Wed Sep 22, 2010 9:22 am   Post subject:   

Quote:
"satisfy" the deductible




I think this is where people get confused with homeowner's insurance deductibles. With medical insurance the insurance company again is not making you pay the deductible up front....they just don't send that part of the money to you or your doctor.



The difference is when you have a roof claim and hand the roofer the insurance company's first payment you may or may not give them the deductible part of the claim. Once the work is complete and you hand them the second check from the insurance company, the roofer "reminds" you that you still owe $500 more.



With medical insurance, the contractor (doctor) makes you pay that deductible part of payment up front. So when they get the insurance payment they are whole.



Then again, I don't know how many calls I got from policyholders when I paid medical claims. They would yell at me and tell me that they already paid their doctor the deductible and now they got a statement (EOB)from me showing they still owe a deductible.


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PostPosted: Wed Sep 22, 2010 11:17 pm   Post subject:   

My insurance company is paying to replace my hail damaged roof, and I'm a little confused how my numbers are working regarding if I will actually owe the deductible. The roofer's estimates were done before the adjuster's inspection. However, even though I provided the adjuster with the detailed estimate from the roofer I will have do the work before I received the adjuster's estimate, the adjuster's estimate came back notably higher. As the numbers below show, the insurance company's total replacement cost estimate is some $1,500 above all of the roofer's estimates I received, which coincidentally is also the deductible amount. And I carefully chose the roofers - these are solid, local reputable roofers, not storm chasers, so I know their estimates are good.



Insurance RCV: $8,500

Less Rec. Depreciation: <2> (pd after repairs complete)

Less Deductible: <1>

Initial ACV check: 4,800

Total insurance pmt: 7,000 (after Recov. Depreciation)



Roofer estimates: 7,000 (from 3 reputable roofers)



So, am I responsible for the deductible in this scenario? The claim paperwork breakdown makes it appear that the ACV has already been reduced by the deductible amount. The claim paperwork also says the insurance company pays based upon the lower of theirs or the contractor's estimates, yet the insurance company already HAD the roofer's lower estimate in writing long before they arrived at their higher estimate amount. I've even already received the initial ACV check, but have not had the work done or signed a contract with the roofer.



So, how's this work? Has the deductible been accounted for in the ACV check I received? Or, when the insurance company is notified the roof is done do they just automatically send me the whole $2,200 depreciation check per the claims paperwork? Or do they reduce it by the deductible amount and just send me $700 since they've got the roofer's estimate which was lower than theirs? Or do I just pay the roofer the $7,000 with the $4,800 ACV check already received and money out of pocket, and notify the insurance co. the roof is complete and receive the whole depreciation check?



Sure would be helpful to be clear about this before I proceed with signing a roof contract. Thanks in advance for any info!


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PostPosted: Wed Sep 22, 2010 11:25 pm   Post subject:   

All the numbers didn't appear in my post for some reason. Here they are again and hopefully they'll show this time.



RCV: 8,500

less depr: (2,200)

less deduct: (1,500)

ACV: 4,800



Ins. pmt: 7,000



Roofer est: 7,000


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PostPosted: Thu Sep 23, 2010 9:25 pm   Post subject:   

Needs help too . . .



The insurance company states it will pay a total of $7,000 to repair your roof. If you can find a roofing contract who will accept that as payment in full, great!



He needs to submit a final invoice showing $8,500 for the complete job. Then the math is accurate.



If the roofer submits an invoice for $7,000, the math will be different: $7,000 - $1,500 = $5,500. If the insurance company's first check was for $4,800, the second check will be for $700 ($5,500 - $4,800). And to pay off the contractor, you need to come up with the $1,500 deductible.



Here's what won't happen.



Insurance company writes a check for $4,800 based on its adjuster's $8,500 estimate. Roofing contractor submits a final bill for $10,000. Insurance company writes a second check for $3,700. ($10,000 - $1,500 total).



They have set the value of the claim at $8,500. If you cannot find a contractor that can complete the repairs for $8,500, then you can argue for a higher claims payment or demand that the insurer provide a contractor who will perform the work to industry standards for $8,500. You can't just submit an inflated claim.



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PostPosted: Thu Sep 23, 2010 11:16 pm   Post subject:   

Thanks for the reply Max. First, I would run, not walk, away from any contractor that even remotely suggested your "here's what won't happen" scenario of padding the bill to effectively steal extra cash from the insurance co and involve me in some sort of insurance fraud scam. No way. I'm just trying to understand how this works and know exactly what it is or is not going to cost me out of pocket before I execute a contract with the roofer, and I guess my confusion is because the $1500 difference between 3 different very reputable roofer's estimates and the claim value. As I said above, all 3 gave me estimates of +-$7000, and they've been in biz locally 15 yrs, 28 yrs, and 35 yrs respectively, and one is actually the roofer that installed our existing roof 16 years ago. The point being, is that these are not fly by night storm chasing roofers, and I trust their estimates.



To clarify, the roofer I chose has been in biz for 35+ years locally, has an excellent reputation, and as I understand it, our contract will be to replace the roof for $7000 per his estimate.



So, are you saying what happens is once work is complete he charges me $7000, but provides a different "invoice" to insurance co for $8,500 that, in essence, covers my $1,500 deductible because that's what the insurance company has set the claim value at, $8,500? I'm okay with that if that's the way it's done and it's all above board. Just not clear why the adjuster, who is already in posession of the roofer's $7000 written estimate, would accept a different invoice from the roofer that "magically" increased by the amount of my deductible. Am I understanding this correctly or missing something here?


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PostPosted: Fri Sep 24, 2010 1:19 am   Post subject:   

Quote:
So, are you saying what happens is once work is complete he charges me $7000, but provides a different "invoice" to insurance co for $8,500 that, in essence, covers my $1,500 deductible because that's what the insurance company has set the claim value at, $8,500?




Yes. What they've said is that even if you chose not to repair the roof, they'll write you a check for $4800. But after the repairs are complete, they'll complete their payment with an additional check for $2200. This demonstrates to the contractor that the money will be there.



The insurance company has set their settlement at a total of $7000 after calculating your deductible. So as long as the total invoice does not exceed that ($7000 + $1500), you're fine. Your contractor can include additional labor or miscellaneous supplies to account for the total invoice.


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PostPosted: Wed Nov 17, 2010 10:31 pm   Post subject: Two ways of understanding deductile in the Philippines?  

In regard to home insurance against fire, flooding, etc., a deductile in the Philippines is understood in two ways.



And I really don't know which one is the really correct way, but someone is making a kill using one way than the other to save money for the insurer.





Here, let me explain:



When your house is insured by the insurance company say for 3 million pesos (one US$ = roughly more or less 43 pesos today), like with each of my two homes, the adjusters employed by the insurer take out 2% from 3 million which is 60,000 pesos, and then when he has already computed how much the insurer will pay you -- which of course is less than 3 million, he will deduct 60,000 from that computed amount arrived at by him which is to be payable to you by the insurer.



Now, I got another adjuster to work on the payable amount by the insurer, this adjuster first computed how much the insurer has to pay me which of course is less than 3 million, then he deducted 2% of this amount from this same computed amount, which then will be the final payable amount by the insurer.





I am asking the people here who are into loss adjustments, do you have such a double dealing way in your practice here?



See my message in another board where I have a long thread on home insurance loss adjustment, but placed wrongly in the auto insurance board,



http://www.ampminsure.org/start/about14697-2.html.



Go to the last message from me there todate.





The way I see it, the adjusters employed by the insurer are into dubious procedures; but I cannot be sure as to the present time which one is really the correct way, or both ways are correct, which is altogether unacceptable to any reasonable person.







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PostPosted: Sat Jan 15, 2011 4:16 pm   Post subject: tax deduction  

Is the $1000.00 deductible that I had to pay to get my roof replaced due to hail damage deductible on my tax return?


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PostPosted: Mon Jan 17, 2011 9:59 pm   Post subject:   

Any part of a casualty claim not covered by insurance MAY be deductible on your federal income tax return, but there are rules that apply. Visit www.irs.gov for details.



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PostPosted: Fri Dec 07, 2012 4:23 am   Post subject: Insurance deductible Question  

I know this question has been asked, but I still don't understand. We have received one check from the insurance company for the RCV , but it is less the $500 deductible. Why would we still have to pay a roofer the replacement plus a $500 deductible? To me that would seem that we are paying it twice. We have the money from the insurance company, so wouldn't it be considered a cash transaction? Why would a deductible have to be paid to the roofer if it has already been paid to the insurance and the roofer is being paid by us and not by the insurance company. (As is what is usually done with auto repairs)


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PostPosted: Fri Dec 07, 2012 5:28 am   Post subject:   

Quote:
I know this question has been asked, but I still don't understand. . . . Why would a deductible have to be paid to the roofer if it has already been paid to the insurance and the roofer is being paid by us and not by the insurance company.


Here's the flaw in your thinking:

When did you pay a $500 deductible to the insurance company?

YOU DID NOT. The deductible was DEDUCTED from the amount the insurance company paid you. That's according to the terms of your contract.



Whatever the amount you owe the contractor is what you owe the contractor. He has not been paid by the insurance company, so he gets paid by you. You can use the insurance company money or you can use your own money. If the insurance company money is not enough to pay for the work, then you use the insurance company money PLUS your money.



The check you received from the insurance company is probably for the Actual Cash Value, not the replacement cost. When your repairs are complete, if the cost exceeds the amount you received from the insurance company plus the deductible, then you file an additional claim for the balance (assuming your policy covers replacement cost -- as most do).



No one has been paid twice. And you didn't pay the deductible to the insurance company.


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