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No, it’s not another $9.8 billion suitcase scenario, but here’s a story that had us scratching our heads this week:A Jacksonville, Fla. couple told the Chicago Tribune about a strange check they received from their escrow account. Apparently, they’d overpaid for the insurance policy on one of their two homes.
Rather than investigating further, they took the company’s word for it and used their new chunk of change to pay off a few bills.
Cut to a few weeks later and their home insurer came calling, claiming they’d missed a payment on their second home. Turns out the escrow account had sent a double payment to one home and totally forgot about the other.
Since the money from their reimbursement check was long gone and they couldn’t pay it back, their mortgage lender penalised the couple with a $300 mortgage payment increase.
Now, we can see how the couple might he held liable for the insurance payment, but charging them an extra $300 on a $700 mortgage seemed pretty severe.
We asked Jim Whittle, assistant general counsel for the American Insurance Association for his take on the story’s central question: were they within their rights to cash the insurance check, given the fact that it was sent in error by a third party?
Pretty much, no.
“At the end of the day, if the consumer wrongfully cashes the check, (insurers) aren’t going to be overly sympathetic,” he said. “You really want to check before you cash it.”
That’s not to say insurers are immune to mistakes. The companies file millions upon millions of transactions each year and all it would take is one small typo or computer glitch to result in such an error.
The important thing to keep in mind is that you never want to leave your premium unpaid while you’re hashing out a dispute with the insurance company, Whittle added–even if you know it was their fault.
“You could be jeopardizing coverage on your home, which is your most valuable asset, because you haven’t paid your premium,” he said.
That falls in line with advice from Andrew Schrage, founder of Money Crashers, who said the last thing on your mind in this situation should be a trip to the mall or paying down your debt.
“My suggestion would be to speak with a supervisor at the insurance company, explain the situation, and agree to some sort of payback plan that will not harm your insurance rates,” Schrage said.
“(Insurers) are of course in business to do business and I think they might be willing to work with someone if it was going to be a problem,” Whittle added. “But insurers, of course, differ and you’d really want to discuss that with them.”