How Your Claim Can Increase Your Price & Impact Your Policy
Things You Should Know BEFORE You Submit Your Claim
You’re probably reading this because you recently had a car accident or suffered some other kind of loss to one of your vehicles, your home or your business. And you’re wondering…
- Should I submit a claim to my insurance company?
- Will there be any negative consequences?
- Will my price go up? By how much?
- Can my policy be canceled? What happens then?
Those are very important questions. While every situation is different, we’d like to provide you some inside information to help guide you to your answers. Admittedly, you can’t get a specific answer to your specific situation in this article. There are many factors that determine the true impact of a claim on your policy. For instance…
- Each kind of insurance is subject to specific state laws and regulations especially involving cancellations.
- Each company has its own internal rules and practices.
- Your personal claims history and circumstances will trigger those rules and practices differently.
Once you have the facts and know what the impact will be, the decision to submit the claim or not is truly personal. What’s right for your neighbor isn’t necessarily right for you. Given the same facts, you each might make a different decision.
The bottom line is this- if you’re concerned about the potential impact of submitting your claim, contact us and discuss your situation! This is just one of the many benefits of doing business with Hample Insurance instead of some faceless 800 number. We’re here to advise and counsel you, to explain how your insurance really works. We’ll give you the facts BEFORE you submit your claim and help you make the best decision for you.
Isn’t This What Insurance Is For?
Yes, insurance is for paying claims. You elect the protection options and limits you want. You pay your premium. Your insurance company pays your covered claim. That’s the deal. Then why all the talk about the “consequences” of claims? Why can claims increase price or even get a policy canceled?
Insurance, and the price you pay for it, is based on risk, the risk of loss occurring. High risk of loss means higher prices are necessary to pay for those increased losses and low risk of loss means lower prices.
The Size Of Your Loss
Clearly, if you have a $20,000 car wreck, or $50,000 of damage to your home or $35,000 of inventory stolen from your store, it’s highly unlikely that you would even consider not submitting that claim. That IS why you buy insurance! On the other hand, small losses can sometimes hurt worse by submitting them. Sometimes it just makes sense to pay your loss yourself and avoid the consequences of submitting a claim.
This discussion about whether or not to submit your claim really only comes into play with small losses, losses that come close to your deductible.
Your deductible has a direct impact on whether you should submit your claim or not. (Your deductible is the amount you pay out-of-pocket toward the amount of your loss, then the insurance company pays the remaining balance.) For example, let’s say you suffer $3,000 damage to your home under a covered claim. Lets say your deductible is $1,000. In this case you pay $1,000 and your insurance company pays the remaining $2,000. Clearly, if the amount of your loss is less than your deductible there’s no point to submitting your claim. You’re going to pay it all anyway, so why report it?
But here’s where it gets a little tricky.
What if the loss is just a little bit more than your deductible amount? What if your deductible is $1,000 and the damage is $1,300? In this case your damages are only $300 more than your deductible. Therefore, you’ll receive only $300 from the company. Is it worth getting $300 to suffer the potential rate increase by submitting the claim? It depends. It depends on what the penalties are!
Depending on the type of loss and your personal situation, this claim may cause an increase in your rates, possibly a significant increase. It may cause your policy to be non-renewed. You may find once you know the exact situation for your personal circumstances, that it’s less costly for you to pay the additional $300 and keep the claim off your record.
The point is, unless you know what the impact will truly be you can’t make a good decision. So if you’re not sure, get the facts.
Did Someone Get Hurt
Many incidents involve only property damage, no one is physically hurt, and there are no injuries. When your loss involves property damage only, it sometimes makes sense to take care of it yourself and avoid the penalties that come with submitting the claim. You pay for the damage and it’s over.
However, when someone’s injured, it’s never a good idea to keep that to yourself. Why? Because no matter how minor the injury may be, the injured party can come back and sue you many months or even years later. If that happens and you didn’t report the claim when it occurred, your insurance company can legally refuse to defend you in the lawsuit and deny payment, as well.
Your policy requires you to report your claims promptly so the company can control the claim. If you don’t, they can deny coverage.
Company Rules And Practices
Regardless of what TV commercials try to tell you, every insurance company is different. They all have their own rules, practices and rate plans, and they all treat claims differently. Some companies have a price for just about everybody. That means that no matter how bad your claims record gets they’ll keep you insured. Of course your price will go up to match your claims experience.
On the other hand, some companies don’t have a price for everyone. When your claims record gets too bad, they’ll non-renew your policy (within the circumstances allowed by law). When that happens you’ll be forced to get insurance elsewhere, and it’s likely you’ll pay a significantly higher price with a new company.
State insurance laws protect you, the consumer. Among other topics, those laws define the circumstances under which a policy can be canceled or non-renewed. Depending on the type of insurance, these laws can provide you a lot of protection or very little. Personal auto insurance is generally well protected under the law. An insurance company can’t cancel or non-renew a policy simply because they don’t want to insure you any longer.
The Decision Is Yours
There are no clear cut guidelines for filing a claim. State laws, company rules and practices, the size of your loss, your deductible and your personal claims history, all mixed together to create your unique circumstances.
If you’re wondering whether or not it makes any sense to submit your claim, give Hample Insurance a call FIRST. Get the facts for your specific situation- and then make an informed decision.