You pay for insurance so that when something happens, you’re covered!
You pay for insurance. So you can use it!
So why am I here telling you that you may not want to file a claim on your insurance policy?
When Should You File An Insurance Claim?
We are going to break that down for you right now. We’re going to talk about how long a claim stays on your record. We’re going to talk about how it may affect your premium. We’re going to talk about your deductible and how it factors into it. Then we’re going to talk about if it’s really worth it to file a claim on your insurance policy?
How Long Does An Insurance Claim Stay On My Record?
Let’s first talk about how long an insurance claim stays on your record.
Most companies are going to hold a claim against you and surcharge you for up to 5 years. Now, there are some personal lines companies that will only hold the claim against you for 3 years, but the majority are 5 years.
It doesn’t matter if you stay with the same company or change companies. You may think you can get around that by moving to another company but no, that is not the case. The claim will follow you no matter which company you go to. Now, as time goes on, they may surcharge you less and less for that claim that is on your record, either on your auto policy or your home policy, they may surcharge you less, but it is going to stay on there for a full 5 years.
Home Insurance Claims
If we’re talking about home insurance claims and really specifically water claims, if you have more than two water claims within a three year period, most of your standard home insurance companies aren’t even going to take the policy, they’re going to reject it. At that point, you’re going to have to go to a special policy to write that homeowner’s policy, and it’s not going to be as good of coverage. It’s probably gonna cost a little bit more than a normal standard home insurance policy would be.
How Does Filing A Claim Affect My Insurance Premium?
So now we know how long claims stay on your record. Let’s talk about how they affect your insurance premium for the next 3 to 5 years.
It’s important to know that an accident is an accident. A claim is a claim. It doesn’t matter if they paid out $5,000 or $50,000. It’s going to show up as a claim. And as we talked about in our scenario with home insurance claims, if you have more than two within a three-year period, it doesn’t matter.
They’re not going to take you even if one of those claims is $1,200 and the other one was $5,000. That still counts as two claims, and that’s going to be held against you and raise your premium.
Now, there are different kinds of claims on your auto insurance policy, specifically comprehensive claims. When we talk about glass claims and towing claims many times, and this is state specific, but many times if you have a glass claim or a tow claim those will not raise your insurance premium.
However, there’s two things to be aware of when it comes to that. If you have some type of a safe driving discount or an accident free discount, they could remove that discount because of those glass claims. So, no, they’re not going to surcharge you for those glass claims, but they may take away those discounts that you’re getting for being a safe driver or an accident free driver.
Also something to be aware of – Let’s say you have three or four glass claims on your current policy. Your current company is not surcharging you for those, but you decide it’s time to change insurance companies. Well, the company that you’re trying to move to, they can see those glass and towing claims and they can charge those against you and charge you a higher premium because of those glass claims.
So a lot of people think glass claims are free. They’re not going to go against your premium, you’re not going to be surcharged, that’s half true, but there are many situations in many ways in which they actually will and can raise your rate.
How Much Does An Insurance Claim Raise My Rates?
People often call us and ask “Hey, I’m considering filing a claim. Can you tell me how much my premium is going to go up?” Unfortunately, insurance carriers, don’t give us that ability to run different scenarios and give you an exact dollar amount. But we’re going to talk about some things that you can do here in just a minute, that will help you determine if it’s worth it to file the claim.
Deductible & Filing An Insurance Claim
Let’s talk about your deductible. This is very important, and it plays into the equation when you’re trying to determine if you should or should not file that insurance claim. On most homeowner’s policies you have at least a thousand dollar deductible. Sometimes you’ll have a $1,500 deductible or a $2,000 deductible. Sometimes it’s even a percentage of your dwelling coverage.
You need to let that play into your decision. If you have a thousand dollar deductible and the damage to your home is a $1,500. You’re only going to get $500 from the insurance company. Then you’re going to see that claim on your record for the next three to five years and you’ll see an increase in your insurance premium.
So you can see by looking at the deductible and figuring out how much you’re going to get back from the insurance company, it’s probably not worth it to file that claim. And the same can be said on your auto insurance. Generally people have a lower deductible on their auto insurance, $250, $500.
But again, that is something that you need to take into consideration when determining if it’s worth it to file a claim.
Why You Should Use An Insurance Broker
And this is a good reason why you need to have an insurance broker instead of going direct online or calling a 1-800 number. If you have a broker, an experienced broker, a helpful broker, they can get on the phone with you and discuss things.
We often have these discussions with our clients, generally our rule of thumb is if it’s $2,000 to $2,500 or less to generally not worth it to file the claim. And again, I look at it from this view. If the damage is $2,000 and I have a $1,000 deductible, I’m only going to get a thousand dollars in payout from the insurance company.
Then we have to take into consideration that claim is going to stay on my record for 5 years. My insurance premium is going to increase for five years. Let’s say it increases by $50 a month. Calculate that times, five years and see what that is. The amount that you’re going to pay extra in surcharge premium for the next five years is greater than the payout you’re going to get from the insurance company.
Again, all of this is not to discourage you from filing a claim. There are many cases where you need to file the claim. That’s why you pay for insurance. One rule of thumb that I use – If there are medical injuries involved, you need to file the claim because with medical injuries, that damage may not be known for another few months. There’s a lot of just extra liability and reasons why you need to file that claim and have your insurance company protecting you and fighting for you.
Please reach out with any questions. We’re always happy to help and guide you!