Read This First
These are the things you should know BEFORE you submit your claim
To our valued clients:
You’re likely reading this because you recently had an accident, suffering a loss to one of your vehicles, your home, or your business.
And now you’re wondering …
- Should I submit a claim to my insurance company or not?
- Will there be any negative consequences?
- Will my price go up? If so, by how much?
- Can my policy be canceled? And what happens then?
Those are very important questions. And while every situation is different, we’d like to provide you with some inside information to help guide you.
Although, admittedly, you can’t get an accurate answer to your specific situation in this report.
Why not? Two reasons:
First, there are many factors that determine the true impact of a claim on your policy. For instance:
- Each kind of insurance is subject to specific laws and regulations – especially involving cancellation
- Each insurance company has its own internal rules and practices
- Your personal claims history and circumstances will trigger those rules and practices differently than, say, your neighbour’s.
Second, once you have the facts and know what the impacts will be, the decision about whether to submit the claim or not is truly personal. What’s right for your neighbour isn’t necessarily right for you. Given the same facts, you each might make a different decision.
The bottom line is, if you’re concerned about the potential impact of submitting your claim, contact us to chat about your specific situation. This is just one of the many benefits of doing business with our local team instead of a call centre employee that could be on the other side of the country.
We’re here to advise and counsel you; to explain how your insurance really works. We’ll give you the facts BEFORE you submit your claim and help you make the best decision – for you.
Isn’t This What My Insurance Is For?
Yes, insurance is for paying claims.
You elect the protection options and limits you want. You pay your premium. Your insurance company pays your covered claims.
That’s the deal.
Then why all this talk about the “consequences” of claims? Why can claims increase my price or even get my policy canceled? That’s what insurance is for!
That’s absolutely true. It’s just not the whole story.
We don’t want to turn this report into an insurance manual, and you don’t want to read one, either! But this is a common question, so let us explain it briefly:
Insurance, and the price you pay for it, is based on the risk of a loss occurring. High risk of loss means higher prices are necessary to pay for those increased losses. And low risk of loss means lower prices.
Now, what determines the level of risk? Lots of things. But claims experience is one of the most important.
Statistics show that people who have a claim are more likely to have another claim. So, when compared to someone with no past claims, someone with an accident or mishap on their record represents a higher risk of loss to the insurance company.
And you already know what a higher risk of loss means — yep, higher prices.
Therefore, when you have a claim, you now represent higher risk of future loss to your insurance company. And sometimes that increase in risk will be met with an increase in price.
The Size of Your Loss
The decision about whether or not to submit your claim really only comes into play with small losses, or losses that come close to your deductible.
If you have a $20,000 car wreck, or $50,000 of damage to your home, or $35,000 of inventory stolen from your store, it’s highly unlikely that you would consider not submitting that claim. That IS what you buy insurance for.
On the other hand, small losses can sometimes be more expensive than they’re worth. The consequences of submitting the claim may outweigh the money you receive from the company.
Sometimes it just makes sense to pay for the loss yourself, and avoid the financial consequences of submitting a claim.
Your deductible has a direct impact on whether you should submit your claim or not.
A quick review: your deductible is the amount you pay out-of-pocket toward the amount of your loss. The insurance company then pays the balance.
For example, let’s say you suffer $3,000 of damage to your home under a covered claim. And let’s say your deductible is $1,000. In this case you pay $1,000, and your insurance company pays the remaining $2,000.
Clearly, if the amount of your loss is less than your deductible there’s no point to submitting your claim. You’re going to pay it all anyway, so why report it?
For example, if your deductible is $1,000 and you suffer $800 in damages, then your insurance company isn’t going to pay anything. The amount of damage is less than your deductible. You’re responsible for the first $1,000, so you’re responsible for the full $800 in this case.
But here’s where it gets a little tricky:
What if the loss is just a little bit more than your deductible amount? What if your deductible is $1,000 and the damage is, say, $1,200?
In this case, your damages are only $200 more than your deductible. Therefore, you’ll receive only $200 from the company. Is it worth getting $200 to suffer the consequences of submitting the claim?
It depends on what those consequences are.Depending on the type of loss and your personal situation, this claim may cause an increase in your rates, and possibly a significant increase. It may cause your policy to be non-renewed.
You may find — once you know the exact situation for your personal circumstances — that it’s less costly for you to pay the additional $200 out-of-pocket and keep the claim off your policy.
The point is, unless you know what the impact will truly be, you can’t make a good decision. So, if you’re not sure, get the facts.
Did Someone Get Hurt?
Many incidents involve only property damage. For example, maybe the wind blows some shingles off your roof. Or perhaps you back into a pole in a parking lot. There are no injuries.
When your loss involves property damage only, it sometimes makes sense to take care of it yourself and avoid the consequences that comes with submitting the claim. You pay for the damage and it’s over.
However, when someone’s injured it’s never a good idea to keep that to yourself. Why?
Because no matter how minor the injury may be, the injured party can come back and sue you — even years later.
If that happens and you didn’t report the claim when it occurred, your insurance company can legally refuse to defend you in the lawsuit and deny any payment, as well.
Your policy requires you to report your claims promptly so the company can control the claim. If you don’t, they can deny coverage.
Defending yourself in court is expensive – even if you win – so don’t take a risk when someone’s injured. Always report those claims.
Company Rules and Practices
Every insurance company is different. They all have their own rules, practices and rate plans. And they all treat claims differently, too.
Some companies have a price for just about everybody. That means that no matter how bad your claims record gets, they’ll keep you insured. Of course, your price will go up to match your claims experience.
On the other hand, some companies don’t have a price for everyone. When your claims record has too many incidents, they’ll non-renew your policy (within the circumstances allowed by law). When that happens, you’ll be forced to get insurance elsewhere, and it’s likely you’ll pay a significantly higher price with a new company.