To Claim or Not to Claim???
The world of insurance can be financially life-saving depending on the outcome of a situation. It could also seem cruel if you don’t understand how the business of insurance works.
Daily, we are tasked with explaining to our amazing clients that it is in their best interests to carry higher deductibles and try not to make claims unless they are financially prohibited by paying it themselves. The response is almost always… “Then why do I even have insurance?” Wow, such a great question!
Insurance, by definition, is an agreement of compensation upon loss in exchange for a premium. The most important thing to understand is that any claim made will ultimately raise premiums due to the simple fact that the carriers view claims as a liability to their agreement. In other words, the more likely a client is to file a claim, the higher the premiums will be. Think of it as a ‘credit score.’
Reasons TO file a Claim:
If you are involved in a crash with another vehicle, you’re usually better off contacting your insurance company right away. Auto insurance coverage (liability specifically) can help you in many ways.
Coverage can help pay for damage or injuries you caused in the collision (up to your policy limits).
Liability insurance can also help pay for your defense costs if you’re sued over someone’s injuries and related expenses.
If you try to reach an agreement with the other person on your own, you run the risk of being sued later if that driver finds that the damage to their car was more than they initially believed.
If you don’t report the accident to your insurance company immediately, and the other party claims injuries or damages, later on, your insurer can and may be able to deny coverage.
When is it OK to not file a claim:
It may make sense to skip filing an auto insurance claim and pay the repair shop yourself in certain situations. If you are involved in a single-car accident (that is minor) AND no one is claiming injury, AND no one’s property is affected (other than your own).
Consider whether the cost of repairing your vehicle is significantly less than or at least up to the cost of your insurance policy’s deductible PLUS premium increase (which, of course, you won’t know the total of). It is not unheard of for policy premiums to go up almost as much as the cost of your more minor claim spread out over a year or two. It’s almost like you ‘took’ a loan from your insurance company for the repair.
When deciding on which deductible to carry and whether to file a claim or not, you need to give that considerable attention. There are MANY factors and of course nobody can tell you which way to decide but you. Remember that the higher the deductible, the lower the premium. The only real reason to carry a low deductible is if you are light on cash.