Why You Should Not File an Insurance Claim (and Why You Should)
Auto Insurance Claims
You were involved in a small fender bender in the parking lot of the grocery store and it wasn't your fault. No one got hurt. The property damage is minimal, and you can probably get the damage fixed for a couple of hundred dollars. The other drivers don't have car insurance cover so they don't want any trouble. Should you file a claim? Is it worth it to get an insurance adjuster involved to get paid out from your liability insurance? Do you even have uninsured motorist coverage?
Let's take that accident and flip so that the property damage was your fault, and the other driver has car insurance. Should you file a claim if you have collision coverage? Or do you only have liability insurance? You have a deductible to pay before insurance covers repair costs if you have collision (the only form of protection that will cover you in this instance).
Are you better off not filing a claim against your car insurance policy? Your insurance premiums may go up if you do. Do you have accident forgiveness? Insurance companies will review all these factors and explain your payout settlement, but you'd be best off making these insurance decisions before something happens.
Accidents happen, and not always in a car. Filing insurance claims is frowned upon by auto insurers and home insurers alike.
Homeowners Insurance Claims
Consider your homeowners insurance in this example: Your wife tripped in the driveway to your house and chipped a tooth. You know this would be covered by homeowners insurance but if you should file an insurance claim. Will the insurance company penalize you? Good question. Your best move is to ask yourself if it's worth it before you start a claims process. Let us tell you why.
Should I File an Insurance Claim?
Every time you file a claim, whether it's accepted or rejected, you are causing your premium to increase. Insurance isn't a product to buy and maximize. It was really created to take care of overwhelming costs you can't afford to fix yourself. An insurance provider takes money from a pool created from premiums to lift some of the heavy financial burden off your shoulders.
Car Insurance Claims
When it comes to auto insurance, you always need to report an accident involving another car if there were damages or injuries. You may be tempted to take care of the damages out of pocket if it was your fault but that is a really bad idea. Even if you cause the slightest damage to another person's car, never settle it without the help of your agent and insurer. They may call and file a claim after you pay them or they may ask you for more money after they've been paid. They may all of a sudden have all sorts of physical injuries they claim were caused by the accident.
Can you file an insurance claim without a police report? Yes, but it's not a good idea. Always call the police and try to take photos of damages to both cars. You can consider paying for damages to your car yourself if you hit a tree or another inanimate object, but if the damage is extensive, you can file a claim on your collision coverage. Just keep in mind that your rate will likely go up, and a lot if you've filed multiple claims.
Home Insurance Claims
Home insurance is slightly different from car insurance because there's usually not another party involved, unless someone is hurt on your property and wants to file a claim. Usually, home insurance is used for major repairs to a damaged home. If you file many claims, the insurance company may raise your rate or cancel your policy so don't file a claim for every minor repair. If your policy is canceled, you'll be hard pressed to find another insurer, and if you do, your policy may be much more expensive than the one you started with.
If your repairs cost less than your deductible or are a couple of hundred dollars more, just pay out of pocket to prevent a hike in rates or the chance of your insurer dropping you. And never file a claim for minor repairs, even if they are covered losses because it's just not worth it in the long-run.
Risking Car Insurance Coverage and Home Insurance
If you're not sure if you're covered for a loss or not, it's best to speak with your agent before filing a claim. After you get some numbers together ask yourself if it's worth possibly being placed in a higher risk bracket than the one you're currently in. You won't be able to hide a claim and bounce to another insurance company either. According to the Insurance Information Institute, when you file a claim, it's documented in the Comprehensive Loss Underwriting Exchange (CLUE), which all car insurance companies and home insurers check before accepting you as a client. All your claims are kept on file for seven years.
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How Will I Be Penalized for Filing a Claim by the Insurance Company?
While it may seem unethical to be surcharged after filing a homeowners claim, only a few states put a limit on that surcharge. Filing for water damage may also raise concerns about mold. If you raise these sorts of red flags, you're always putting yourself at risk for a higher rate or of losing coverage altogether. It's not unheard of for a carrier to drop a client with water damage for fear of a second claim for mold.
Again, file a claim when the case is extensive damage to your home or car, you simply cannot afford it and the loss from the accident or peril costs more than your deductible. Check your home insurance declaration page to see what you elected as your deductible amount.
Check your auto insurance policy to see what your deductible amount is before you make an auto insurance claim on your vehicle. Single car accidents will also result in an insurance rate increase but multiple car accidents will result in a high insurance rate increase on every vehicle you own, even if they are with different insurance companies.
Filing a claim according to your driver's license is a privilege all auto insurance companies have. A car insurance company will check this information periodically, and you will see the rate increase at renewal time. A car accident is a red flag for irresponsible driving.
Will I Be Penalized if I Don't File a Car Insurance Claim After an Accident?
Car insurance is different from homeowners because you should almost always contact the police and insurer when there's a collision with another car. Aside from the owner of the car coming to you for more money if you settle without your insurer, what looks like slight damage may end up costing thousands of dollars. It won't reflect well on you if you don't report it right away. Also, injuries from an accident may take a while to show symptoms. You don't want to handle these complications on your own because it may turn into a money pit. Let your insurer/agent handle he claim. If your car is the only car damaged, your collision coverage will take care of the cost of damages and repairs if it was your fault, as long as you notify them right after or very soon after the accident.
When Should I Not File a Car Insurance Claim?
If you hit an inanimate object that doesn't subject you to a fine, you may consider paying for the damages yourself, even if you have collision insurance. The deductible you'd have to pay in order to get reimbursed may be more than the cost of damages. Note that a surcharge (rate increase) usually lasts up to five years and begins to drop thereafter.
How Many Claims Are Too Many?
According to some agents, even two claims in a three-year period is too much for a homeowners insurance policy and it may cause the insurer to cancel your policy or to penalize you with a hike in premiums. Claiming even more than that can render you uninsurable by any company.
Is Your Home Insurance Claim Related to a Maintenance Issue?
You should always maintain your home for many reasons. For one thing, a well-maintained home is cheaper to insure than one with the roof coming apart. Also, it's easy for insurers to reject claims on a house that is poorly maintained. So, don't assume that your old and leaky roof will be covered after the next storm passes. Filing a homeowners insurance claim for roof damage is one of the most common claims, but it's not always paid out in full.
And, again, read through your policy to see if a certain type of loss is covered before you file a claim. Even if it's not covered by your policy, your claim filing will stay on your record for seven years. Always review your policy in full (especially the "exclusions" portion) before filing to avoid penalties.
Review Your Policies with an Insurance Agent
It never hurts to ask your agent for advice and questions about your home insurance policy and coverage terms. Usually agents have answers or can do some research by contacting their claims department, all without putting a claim on your record. It's best to go this route than to be penalized when your loss is not even included in the list of coverages. Your agent will also know how many claims are too many claims and whether or not you should try to pay for repairs yourself. With all that said, you need to be careful of the agent who will be wary of being accused of not reporting an accident to the insurer.
It is possible that the agent may write something on your record. Yes, it gets tricky. This is why you need to have an insurance agent that you trust and one that will always look out for your best interests. If you feel hesitant calling on your current insurance agent to do the sort of footwork mentioned here, you should consider a new quote and a new agent by visiting here.
Alternatives to asking your agent claims questions are calling the Office of Insurance Regulation in your state or speaking with a private adjuster.
Check Your Credit Score
Get on Experian.com or Credit Karma to see what your credit score is. You may be paying high rates for both car and home insurance products because of credit score, not just your driving record. Drivers with high credit scores pay less in states that allow insurance companies to use credit rating.
A credit score indicates what type of client you'll be and if you'll have at fault accidents with other drivers or you may not maintain your home. So, avoid accidents and get your finances in order.
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