Will Filing an Insurance Claim Raise Your Rates?

Written by LakevilleInsurance on . Posted in Uncategorized

September 18, 2012 Investopedia

You buy insurance to protect your home and car from damage, but when an accident happens, is it in your best interest to file a claim? It seems like the answer should be a resounding “yes,” but a middling “maybe” is a far better response. Why the ambiguity? The decision to file a claim can have a major impact on your insurance rates, even if the accident was minor or not your fault.

The Claim Game

Regardless of the scope of the accident or who was at fault, the number of insurance claims you file has a direct impact on your rates. The greater the number of claims filed, the greater the likelihood of a rate hike. File too many claims and the insurance company may not renew your policy. Similarly, if the claim is being filed based on damage that you caused, your rates will almost surely rise. On the other hand, if you aren’t at fault, your rates may or may not remain unchanged.

If you are hit from behind when your car is parked or your siding blows off of your house during a storm you are clearly not at fault, and your rates might not increase. This isn’t always the case. Mitigating circumstances, such as the number of previous claims you have filed, the number of speeding tickets you have received, the frequency of natural disasters in your area (earthquakes, hurricanes, floods), and even a low credit rating can all cause your rates to go up, even if the latest claim was for damage you did not cause.

Most & Least Damaging Claims

When it comes to rate hikes, not all claims are created equal. Dog bites, slip‐and‐fall personal injury claims, water damage, and mold are red flag items to insurers. These items tend to have a negative impact on your rates and on your insurer’s willingness to continue providing coverage. On the other hand, the dreaded speeding ticket may not cause a rate hike at all. Many companies forgive the first ticket. The same goes for a minor automobile accident or a small claim against your homeowner’s insurance policy.

Rate Hikes

Filing a claim often results in a rate hike that could be in the 20‐40% range. The increased rates stay in effect for years, although the size and longevity of the hike can vary widely from insurer to insurer. At some firms the increase lasts just two years, while at others it may last for five. If your insurer drops your coverage, you may be forced to purchase high‐risk insurance, which can come with extraordinarily expensive premiums.

To File or Not to File?

There are no hard‐and‐fast rules around rate hikes. What one company forgives, another won’t forget. Because any claim at all may pose a risk to your rates, understanding your policy is the first step toward protecting your wallet. If you know your first accident is forgiven, or a previously filed claim won’t count against you after a certain number of years, the decision of whether or not to file a claim can be made with advanced knowledge of the impact it will or won’t have on your rates.

Talking to your agent about the insurance company’s policies long before you need to file a claim is also important. Some agents are obligated to report you to the company if you even discuss a potential claim and choose not to file. For this reason, you also don’t want to wait until you need to file a claim to inquire about your insurer’s policy regarding consultation with your agent. Regardless of your situation, minimizing the number of claims you file is the key to protecting your insurance rates from a substantial increase. A good rule to follow is to file a claim only in the event of catastrophic loss.

If your car gets a dent on the bumper or a few shingles blow off the roof on your house, you may be better off if you take care of the expense on your own. If your car is totaled in an accident or the entire roof of your house caves in, filing a claim becomes a much more economically feasible exercise. Just keep in mind, even though you have coverage and have paid your premiums on time for years, your insurance company may decline to renew your coverage when your policy expires.

A Strategy to Save on the Cost of Your Policy

Understanding the logic behind filing a claim only in the event of a large loss also provides insight into how to save a few dollars on your insurance premiums. Because you aren’t going to file a claim in the event of a minor loss, having a low deductible on your policy makes no financial sense.

If you already plan to pay for the first $500 or $1,000 worth of damage out of your own pocket, set aside that amount in an interest‐bearing savings account and raise your insurance deductible to match the number. A higher deductible will result in lower insurance rates, and the cash in the bank will cover your out‐of‐pocket costs in the event of an accident.

The Bottom Line

When you pay your insurance premiums regularly and on time, it may seem like you should be able to file as many legitimate claims as you want. Unfortunately, the industry doesn’t work this way. Filing too many claims, or certain kinds of claims, can have an adverse effect on your insurance rates. Your insurance company can even cancel your policy after the claim has been paid. To avoid unfair rate hikes and unpleasant financial surprises, do your homework and learn about your particular insurer’s policies and industry practices long before you ever need to file a claim.

Avoiding Contractor Scams

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Every year, many homes and commercial buildings are damaged by severe storms. Property owners become the victims of unlicensed, uninsured, and inexperienced contractors as well as outright scammers who come to prey on uninformed people.

Poor-quality contractors and scammers can cause permanent damage, devalue your property, steal your money, and put you at personal, legal, and financial risk—not to mention all the headaches! Many scams begin with a knock at your door or an unsolicited call on the phone from someone who claims to be a contractor.

Unfortunately, many scam companies imitate legitimate contractors, so protect yourself by checking your contractor out before agreeing to an inspection. Make sure any contractor you work with is properly licensed, insured, and provides three local references.

Scam Warning Signs

The following list represents the most common indicators that the person or company you are speaking with might be running a scam:

  • Not properly licensed
  • No insurance or under-insured
  • No local office (beware of P.O. boxes and hotel addresses)
  • Won’t provide local references
  • Demands up-front cash or deposit
  • Shows up on convicted criminals and/or sex offenders list

Out-of-State Contractors

If you decide to hire a contractor that is based out of state, make sure they have a local office or reciprocal relationship with a local contractor who will perform warranty repairs if your contractor should leave the state. It is important to remember your workmanship warranty is worthless if your out-of-state contractor leaves the state and does not have a local representative to honor the warranty.

Storm Chaser Scam Warning Signs

Storm chasers are like ambulance chasers. They flock to areas of the country that have been recently hit by damaging storms and attempt to scam people that are in need of serious help. Watch for the following warning signs that might indicate someone is trying to scam you:

  • A temporary office or P.O. box
  • Out-of-state phone numbers
  • Out-of-state license plates
  • Staying in a hotel or motel
  • No local references
  • Unfamiliarity with your area

Common and Preventable Homeowner Claims

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Most homeowner claims result from negligence or as the result of a component of the home deteriorating. Your best bet in preventing a claim is to perform routine maintenance and never ignore a developing problem. Implement the following preventative measures and precautions to keep your home safe and accident-free:

  1. Kitchen fire – The majority of fire losses originate in the kitchen due to food that is left unattended on the stove or grease ignition. Never put out a grease fire with water. Use baking soda or flour instead.
  1. Careless smoking – Always pay attention to how cigarettes are discarded. Do not discard cigarettes in trash cans where other debris can ignite.
  1. Candles – Never leave a room with an unattended, lit candle.
  1. Fireplace ashes – Never discard ashes in a combustible container or store them in or around the house or garage. Ashes can remain active for days and combust when fuel and air are introduced. Store ashes in the yard away from your home, or introduce water into the container to ensure that the embers are extinguished.
  1. Dryer fire – Every year you should clean the lint build-up from under your clothes dryer. The motor can ignite the lint if too much lint accumulates.
  1. Washing machine hose – Check the washing machine hoses annually for dry rot, cracking, and tightening. Hoses should be replaced every couple of years. The water to the unit should be turned off when not in use.
  1. Refrigerator ice maker line – Often these lines become pinched and start to leak. This causes damage to the flooring material and cabinets. Check the lines annually.
  1. Valves to sinks and toilets – As your home ages, you should continue to check all plumbing fixtures and connections. Look for corrosion and rust around valves. If your home is over 20-years-old, consider having a plumber check and replace all connections and hoses.
  1. Theft of property from vehicle – Do not leave valuable items in plain view inside your vehicle. Use the trunk instead.
  1. Ice dams – Make sure your gutters are free of debris in the spring and fall to ensure that water can run off the roof and down gutter drains. If you have several inches of snow on your roof, consider shoveling back the first few feet to allow the snow above to melt and drain from the gutter. Be safe and do not endanger your safety by doing this from the roof. Use a ladder instead.

Protect Your Home from Rain Water Intrusion Now

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If you have not experienced rain water entering you home from the many downpours this weekend, consider yourself lucky. With more rain in the forecast, your luck may eventually run out.

Here are a few tips that may help keep your property dry:

  • Check gutters for any clogs – Gutters that are filled with debris do not allow water to flow through properly and the water will seep into areas closest to the clog.
  • Install window well covers to help keep standing water out – This is an inexpensive fix. The Home Depot sells these for around $18.00 each.
  • Slope your landscaping – Landscape grades that run toward the house instead of away from it often result in flooding. Make sure there is an adequate slope away from the house for at least 10‐15 feet. A professional landscaper will help you assess the situation and give advice for further prevention.
  • Provide emergency power – Install an automatic emergency generator to provide electric service for essential circuits like the well pump, refrigerator, septic tank pump, and sump pump in case power is lost. Without emergency backup power, you may return home to unnecessary basement flooding or a flooded septic tank.
  • Install a backup sump pump – The sump pump is your first line of defense against basement flooding. However, the most reliable sump pump available in the industry is still a mechanic device and can fail. A backup sump pump system, preferably with at least a battery‐operated pump configured with a switch device to begin working if the main is out of commission, greatly reduces the chance of flood. Some systems come with additional security features such as an alarm that goes off whenever the battery operated pump is started.

Sewer Back-Up Tips from the IICRC

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Institute of Inspection Cleaning and Restoration Certification

Sewage is one of the most dangerous substances to enter homes or buildings. It contains fungi, bacteria, and viruses, many of which are disease-causing. Unfortunately, many people fail to understand the hazards that sewage presents, particularly for the very young, very old, those with compromised immune systems, or those with respiratory problems.

Here are the key principles homeowners should know about sewage back-ups:

  • Sewage contains a variety of pathogenic–disease causing–fungi, bacteria, viruses, and parasites. Anyone who works on sewage losses must have updated vaccinations, including one for Hepatitis B.
  • Sewage exposure is particularly dangerous for people with weakened immune systems including anyone under 2 or over 60; those who are pregnant, ill, recovering from surgery, on prescription drugs, or going through chemotherapy; or are AIDS victims.
  • It is not safe to stay in a building that’s flooded with sewage unless the contaminated area can be completely sealed off and placed under controlled air flow so that there will be no cross contamination of unaffected areas.
  • Highly absorbent sewage-saturated materials, such as carpet, pad, upholstery, bedding, wicker, paper, or even fabrics that can’t be washed in hot water (130°F/54°C) for at least 10 minutes, must be contained and disposed of properly. This goes for sewage-saturated drywall, insulation, and several other structural materials, too. There’s simply too great a health risk involved if any of these materials are dried in place and cleaned only.
  • Only the most highly trained professionals should attempt sewage remediation work. Then, a third party indoor environmental professional can provide post-remediation verification or clearance testing to ensure that the home or building is safe to re-occupy.

Why Use A Certified Restoration Company?

Professional restoration technicians understand the need for quick response. Immediate remediation is key to controlling any escalating costs. The longer the remediation is delayed, the higher the cost of restoration. Certified restorers have the knowledge to test materials and apply the restoration techniques required to return the items to their pre-loss condition.

Look for the IICRC logo to verify IICRC certification.

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