When Is The Wrong Time To File An Insurance Claim?

There has been a flurry of “news” and magazine articles recently claiming to know when not to file an insurance claim. Unfortunately, they are wrong about 75% of the time. Few of these articles quote their data sources so it’s difficult to respond, but let’s clarify just a few of the most common that I have paraphrased.

  • Never file a claim or you will definitely be surcharged and probably have your protection canceled.
    FALSE. Cancelations resulting from a single claim are almost unheard of in our office. The exception is if a condition exists where more claims are likely and our client refuses to remedy the problem (again, I can’t remember the last time we had this situation at Goldsborough). On the surcharge issue, we have been successful in convincing our insurance company partners that a better solution would be to adjust a deductible or manage the exposure in another way.
  • If your claim involves both your homeowner’s policy and your auto policy don’t file both claims.
    FALSE. For example, you back your car into the garage door damaging both the car and door. The reasoning is that you will not only face two deductibles but you will have your coverage canceled (see above). We represent a number of insurance companies that have a “single deductible” rule when you incur this type of situation.
  • If you could have prevented the damage you should not file the claim
    FALSE. If the claim was an intentional action on your part then yes, not only shouldn’t you file the claim, but chances are pretty good it won’t be covered. However, simply because you may have known a claim might have occurred is not a reason to hold back on filing a claim.
  • Don’t file a claim if it won’t pay much more than the deductible.
    TRUE. This one they got right. If you have a homeowners, auto or business claim where the cost to repair is close to the deductible it is almost never a good idea to file the claim. Over the next few years you will probably lose any loss free credits you have accumulated and in the worst case will be surcharged on your renewal. In the end, the insurance company will get the money back they paid you…and then some. Caution! This rule applies to first party claims only. That means if there was another human involved, file the claim.

Most of the articles are written from the point of view that the insured is on his or her own to figure all this out. That may be true for those who bought their insurance policy from direct writers (Geico, Elephant), but not for people who work with independent agents. Unless there is someone injured, the first call should be to your agent to discuss, not just the particular situation and its impact on the premium for that one policy but the account as a whole, the risk management of the insured family’s (or businesses) entire situation.

For example, a client recently reached out to me about vandalism to his brand new, very expensive car. The damage was almost $2,500 higher than his deductible. After we discussed his situation I advised him to pay for it out of pocket and he was happy with that recommendation. Why? Yes, he would have forfeited a loss free credit on his account but his renewal policy was over six months away after his youngest son became licensed and his daughter had taken a car to college with her. The savings the loss free discount offered was substantial after considering the higher premium from adding the children to the policy. Your agent knows not just the impact of the one incident, but what questions to ask to put you in the best possible financial and protection position in the long run.

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