The insurance industry has done a pretty decent job of educating the public that when you’re involved in a car accident or something happens to your house, you need to report the claim.
However, this education has backfired slightly- claims come hot and heavy and sometimes often. Ohio insurance companies have pushed back with claim surcharges, increased deductibles and even cancellation due to frequency.
So insurance agents have switched their focus and the push is to now educate on WHEN a situation warrants turning in the claim (if at all). Because insurance was never meant for maintenance- it was designed for catastrophes. And by turning in several claims in a short period of time, you jeopardize your existing insurance and hurt your chances of getting future insurance (at a bare minimum you'll pay more for your insurance if you have a lot of claims).
Here are several situations where you should consider turning in a claim:
- The damage to your property is simply more than you can pay out of pocket. If the damage is significant, chances are good you simply don’t have the money to pay for the repair yourself. For example, you hit a deer, causing $4000 in damage. The average person doesn’t usually have that much sitting in a bank account. So in this example, 9 times out of 10 you’ll turn in the claim for the insurance company to pay so you can fix your vehicle.
- There are injuries to another party. Let’s say you cause an accident and people in the other vehicle are injured. Or maybe you have visitors to your house and there is an injury. Depending on the severity of the injuries, you simply may not have the money to pay for those injuries out of pocket.
- You’re served lawsuit papers. The minute you receive those papers, you need to contact your insurance company. Once the legal train gets going, it becomes VERY time sensitive and must follow a certain process. The insurance company has a complete legal team at its disposal and they know EXACTLY how to respond to legal paperwork, the timeframe in which to respond and so forth. Many people don’t think about this, but when you buy an insurance policy, you also buy access to legal representation. So let them do their job so you don’t miss an important deadline, paperwork requirements or get into trouble.
- When the damage far exceeds your deductible. True story, we’ve had customers turn in $600 claims when their deductible is $500. Although there’s no hard and fast rule as to the “right” amount, if the damages are only a few hundred more than the deductible, you should seriously consider paying out of pocket. Save the insurance for the claim that you simply can’t pay out of pocket (reference #1 above). It’s meant for catastrophes, not small claims.
And while we've heard many times "well that's what insurance is for", no it's not. It's not designed to pay for every little thing that goes wrong. Again, it's not a maintenance policy, it's for big stuff.
Too many claims in too short of a time period becomes a frequency issue for insurance companies and they can do one of many possible things (please note, these are not mutually exclusive. A company could require a deductible increase and a coverage removal at the same time. Of course cancellation is the final straw).
What Ohio insurance companies can do if you have too many claims
- Require you to increase your deductible.
- Apply a claim surcharge. This surcharge results in additional premium on your policy and that premium stays on your policy for a set period of time (3, 5, 7 years? Varies based on company, but it’s usually longer than 1 year). So even though the claim may have long since been paid, that surcharge stays.
- Remove the coverage altogether. For example, you have 3 water backup claims in two years. The insurance company may require you to remove the water backup coverage.
- Cancel or non-renew for frequency. Please note that while options 1-3 may leave some room for negotiation, cancellation is usually non-negotiable. And keep in mind that if YOUR insurance company has a problem with frequency of claims, a NEW company will likely have a similar problem. This could mean trouble getting new homeowners insurance.
The lesson here? Discuss the situation with your insurance company/agent to help decide whether or not to turn in a claim. While the traditional advice was normally to turn in the claim, things have changed! Small dollar claims or ones that are barely more than the deductible should probably be paid out of pocket. This helps avoid the insurance company taking action due to frequency of claims. Use your insurance for its intended purpose- the situation where you simply can’t afford to pay out of pocket or you’re being sued as the result of a claim.
Like how we explain insurance? Let us handle yours (Ohio only). Call us at (937) 592-4871 or request your quote today!
P.S. For more helpful info about insurance claims, check out these additional articles....
How do Ohio homeowners insurance claims work?
Can I close my insurance claim after it's started?
How do accidents affect your car insurance?