The fourth & final installment of our 4 ways not to save thread may ruffle your fur a little bit. Keep in mind while reading that it’s simply a different perspective to consider. We are going to address the issue of whether or not you should file an insurance claim.
There are quite a few websites that offer thoughts to consider, especially when it comes to whether you should file a claim on your auto insurance policy. Truth be told, there are scant few solid answers that apply to every situation. 99% of the time, it’s ultimately going to end up being a (hopefully) well-educated decision. Oftentimes, personal preference also plays a significant role.
Agents are always asked “If I file this claim, will my rates go up?” As I said above, there’s hardly ever a concrete answer that’s going to apply in every situation – it’s heavily circumstance-dependent. If you ask your agent this question, you are often going to receive the answer, “Well, maybe…. If thus & so happens, then …..”
Insurance rates are a very complicated calculation, and do not simply involve whether or not you’ve ever filed claims before. I’ve addressed this very briefly, only glancing across the surface of the issue. That being said, your claim history IS a major factor behind how much (or little) you are paying for your insurance coverage.
Your claim history is based on two different factors, from a premium perspective – frequency and severity.
This post is going to address frequency. I will write a short post early next week to address severity.
Frequency of claims is something that insurance companies keep a close eye on. With regard to auto insurance, companies often have very specific measurements they follow, monitoring things like claims frequency and your driving record (speeding tickets & other violations). Obviously, the higher the number of claims & violations, the more likely it will be that you will either A) be paying more for your coverage, or B) not be able to obtain insurance with a desirable company. This happened to a person I was obtaining quotes for recently. They had not ever had any major claims, and only had one violation. However, in the past two years, they had filed four separate, small (under $1000 each) claims. As a result, I had a very limited number of companies I could obtain quotes from, and they ended up paying a substantial amount for coverage.
Similarly, companies watch the frequency of claims on policies like home owners or business/commercial property. Filing multiple claims is something that will often drive your premium up – in essence, the company views you as more at risk of having at least one claim in a given year. This is one of the reason that the rates for coverage with a higher deductible are often substantially lower (as I briefly addressed in part one of this series) – if you have a higher deductible, it significantly reduces the frequency of claims. Unfortunately, even if you had no control over the cause of loss (IE – a windstorm or lightning strike caused damage), if you file a number of claims, your premium will in all likelihood go up.
If you are in a claim situation, I would recommend that you pull together all the applicable information – date, circumstances, item(s) damaged, estimates for repair/replacement, etc – then contact your agent. Your agent will review the data about the loss, your personal claims history, and the guidelines of your insurance company. They will be able to offer you thoughts & suggestions, but as I said about, in most cases, you are going to have to make an educated decision about how you want to proceed.
That’s all for this week – we are going to review severity shortly!