One thing that sets insurance apart from other consumer products is that it’s something we all have to buy but hope to never need to use. So when is it worth making a claim?
Insurance policies are designed to address most of the common losses faced by business owners, homeowners, and vehicle owners. That being said, it’s not always worth your while, or in your best interest to make a claim – so how do you know?
Insurance policy rating is almost always “usage based” meaning that using a policy to make a claim will almost always impact the rating of your policy come renewal time.
When making a claim, it’s always a good idea to think of your “total cost of making a claim” rather than simply thinking about your deductible or your claims-free discount. Generally speaking, a claims-free discount is 10 – 15% of your premium and is removed for 3 years following a claim. Following that, the total cost of making a claim is then your deductible plus 10-15% of your premium X 3 years. For most homeowners, the total cost of a claim is between $1,500 – $2,500.
There are other considerations when making a claim as well. Did you know that when you apply for insurance, your insurance company will check your claims history in a shared database that contains information on almost all property claims? A claims check for a new application typically spans the prior five years. Insurance companies often have a policy of declining an application or applying premium surcharges and coverage restrictions where there are two or more claims in a five year period. It’s good to keep this in mind, when a claim is close to your “total cost of making a claim” sometimes its best to cover the expense out of pocket, just to keep that claims history clear in case something major happens.
The advantage of having a broker is that you have a representative who works for you, not the insurance company. A broker can discuss your options, help you figure out your “total cost of making a claim”, and help you make the claims decisions that are right for you