You’ve had a loss and you’re wondering, how best to proceed? Will filing a claim negatively affect you going forward? Will you pay a higher rate next year because of this claim? The honest answer to both of these questions is…Possibly.
Claims Versus Premium:
Insurance is there to cover you in the time of a loss, that is what you pay your premium for, correct? Yes, but the premium you pay has a direct correlation to your perceived risk (calculated, in part, by the history and frequency of the claims you’ve filed). The higher the premium, the higher the risk, the lower the premium, the lower the risk. If a policy has a high frequency of claims (i.e. consistent claims being filed) a carrier may choose to no longer underwrite the policy , or start charging a higher premium, as it has become more risky for them (i.e. more costly for the carrier to insure you).Essentially, the more claims you have, the more expensive your insurance will be, the fewer claims you have the less expensive your insurance will be.
Insurance carriers tend to give greater savings to those insureds who purchase higher deductibles than those who choose lower deductibles. The thinking is that in the event of a claim, the insured with a higher deductible is willing to take on a greater portion of the risk, and therefore should be charged less in premium for that. Insureds with higher deductibles therefore tend to file less smaller claims as those claims would not be covered or would because they are below the deductible Many times the actual savings in annual premium between having a high deductible and a low deductible, may in fact be more than the difference in the deductibles themselves. For example, having a $1,000 deductible may cost you $700 less in premium each year than if you were to have a $500 deductible (the difference between the two deductibles and the savings ).
Insurance, in fact, is becoming more for severe (or catastrophic) losses than for smaller losses and the insurance carriers pricing reflects this change in thinking. This is becoming more evident, not only in property insurance (i.e. auto or home insurance) for example, but also in the health insurance marketplace where higher deductibles on health insurance equate to less costly health insurance premiums.
It all goes back to the topic of risk and what carriers are willing to insure and at what price. It is becoming more advantageous for insureds (i.e. less costly) to have higher deductibles and pay out of pocket for smaller claims because the alternative (lower deductibles and filing frequent claims) will actually cost them more in premium every year.
Higher deductibles save you money!
Surcharges and Loss-free Credits:
We all know that insurance carriers cover claims subject to the deductible on your policy, so a property damage claim to your vehicle that may cost $600 to repair but is below the cost of the deductible, say $1,000 will not be covered by the carrier. What about a claim where the cost to repair is above the deductible but not by much, what happens then? Let’s say that property damage claim is $1,300 and your deductible is $1,000. The insurance will pay the $300 after the $1,000 deductible, but if you were at-fault for the accident you may also get surcharged and have to pay additional premiums yearly for the accident (aside from also losing your “good driver” discount). It is more costly for you to have the carrier pay the $300 for the accident because you are now faced with higher premiums in the years to come. The same holds true for home insurance claims, where a claim is paid on a loss that is slightly higher than the deductible. Let’s say your fence is damaged and causes $1,200 in damage and after your $1,000 deductible is applied the carrier pays the $200 difference. When your policy renews next year your premium goes up because you no longer retain the loss free credit you’ve had on previous policy terms. This loss free credit can, based on the policy premium, add up to hundreds of dollars of credits (or savings being lost). This is another situation where paying out of pocket for the claim would be less costly for you.
What does it all mean?
We know that when an accident occurs it can be a very difficult time and you may have numerous questions or concerns. As such we ask that you first please contact us at the agency directly so that we can assist you prior to you filing the claim directly with your carrier.
Here are just a few of the areas in which we can help assist you in when a claim occurs:
1) Coverage & Policy Review:
- Am I covered?
- We are your coverages and endorsements?
- What are your deductibles?
- What are your liability and property damage coverage levels?
- Do you have rental car coverage and towing coverage?
- Is the driver covered under my policy? (We like to know that the driver involved in the accident is noted on the policy as a “regular use” driver)
2) Additional Benefits:
- Do you have any benefits on your policy that can help reduce your out-of pocket expense? -Do you have accident forgiveness?
- Do you have deductible dollar credit that you can apply towards this claim?
3) The claims process:
In addition, we can help walk you thru the claim process with you so that you know what to expect from our carriers. As part of this process we can assist with the following:
- Inform you as to what documentation and information you will need prior to filing (i.e. information regarding the other party, accident reports, eye witness accounts, police reports).
- Answer questions about what you can expect once the claim is filed and how to proceed.