You pay a lot of money for your insurance and you want your policy to take care of you when you have a loss. We agree. However, there are a few things you will want to consider before you actually file a claim.
- Advice – When you purchase insurance from an agent (vs. going to a direct writer like GEICO) part of the benefit is having someone you can call for advice and “off the record” conversations. We always tell our clients that unless your house is on fire in the middle of the night, call us first if you are considering filing a claim. We’ll talk it through, make sure it’s covered, make sure it’s ‘worth it’ to file the claim, and then map out what the next steps are. Just this week, we had a new home policy declined because the client called their insurance company directly to file a claim that ended up not being covered, $0 paid out. That was their 2nd claim in 5 years and that phone call prevented them from getting coverage. Call your broker first and allow them to advise you on your options and the potential impact of filing a claim.
- Why do rates go up after a claim – First off we need to understand that insurance contracts are not the same as a savings account. Insurance is statistics and risk analysis. 100,000 people that filed a claim in the last 3 years are statistically more likely to make another one than the 100,000 other folks who have not made any claims in the last 3 years. For this reason, carriers will surcharge clients that have made a claim. Some carriers do this by removing the claims free discount. Either way, the math tells us your risk is now greater and therefore warrants a higher rate than the person that hasn’t filed a claim. The rough math on the surcharge is about one year’s premium spread out over three years. So, if you’ve got a $1,000 annual premium, you can expect to pay around $330 more per year for the next 3 years.
- So when is it worth it to file a claim –
- First off, insurance should really be for the ‘big stuff’. People define that differently, but you should try to take care of the little stuff yourself, if you can.
- You at least want the damage to be more than your deductible, and then plan for the upcoming surcharges. So, if you have a $2,500 deductible, and a $1,000 premium…. You’ll want the damage to be north of $3,500 at least before filing a claim.
- Frequency is a big factor – If you file one claim in 3 years… no big deal. Stuff happens. That’s why you have insurance. But often times, carriers will non-renew your policy if you file two claims in a five-year period. Not always, but that is a good rule of thumb. They’re looking for patterns… is it the same type of claim? Like two theft claims? Or are they water related? Is negligence an issue?
- Another reason to only use home insurance for the ‘big stuff’. If you file a claim for a small issue, that may limit your options later if you need to file a 2nd claim. Yet another reason to call your agent to have an ‘off the record’ conversation before you file a claim.