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Insurance: to claim or not to claim?

Claim question: be guided by the deductible

Dear Dave,

How do you know when you should file an insurance claim on a homeowner’s issue, versus just dealing with it and paying cash?

— Ben

Dear Ben,

Basically, it’s when you begin to feel the pain financially. Let’s say you have a $1,000 deductible on your homeowner’s policy. If you have an $1,100 issue, just pay the $100 out of pocket and don’t mess with it. But let’s say you have the same deductible and a $2,000 problem. Depending on things like your overall financial situation, the value of the house, and the cost of the insurance policy, that might just get you to file a claim.

Somehow, lots of people get the idea they can make money on insurance process. You don’t. Insurance companies make money, and consumers pay insurance companies. You don’t make money on insurance in the long term. You may have a situation, once in a blue moon, where you come out ahead on a transaction versus what you paid in. But over the scope of your life, you don’t make money on insurance companies.

The point is this: If you turn in the claim, you’re going to experience a rate increase or cancellation somewhere — at some point — that offsets it. I only turn in substantial claims, meaning claims that are far above the deductible.

— Dave


Dear Dave,

My in-laws have inherited some money, and they want to invest in real estate. They have offered to help my husband and I buy a home, but they want ownership of some kind as part of the deal. Is this a good idea?

— Cynthia

Dear Cynthia,

I’d pass on this offer. It’s not a good deal.

I’m glad they got some money. I mean, that’s great for them. If they want to do some real estate investing, that’s awesome, too. If they want to give their kids a gift out of the inheritance money, that would be a very nice, generous thing to do. But no, we’re not going for a deal where they have ownership in your home. Things like that end up messy, and it won’t get you where you really want to be. Even if it does, you won’t like the trip!

If you take a deep look into this, you’ll begin to understand there are some things involved that will change the nature of your relationship with your in-laws. Every time you see them and they see you, they’ll see dollar signs. Dinners together will start to taste different, and they’ll feel different, too.

Protect your relationships and your family, Cynthia. Please don’t do it.

— Dave

Dave Ramsey is CEO of Ramsey Solutions. He has authored seven bestselling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey