Insurance Claim Time… Or Is It?

September 14, 2018

calculationMany clients think that the first thing they should do during or after a claim is to call their insurance company and report it. In some cases, this is true. But in cases where the damage is minor or there are questions about coverage and deductibles, you should call your agent first. Below are some real life claims scenarios that we have encountered.

Scenario 1

Michelle’s son James had just backed into a pole, causing damage to his bumper. She calls, reports the claim, pays her deductible and gets her bumper fixed.

  • Deductible: $250
  • Insurance company paid: $300

However, James had a ticket the year before and this new claim resulted in a loss of his good driver discount.

  • Rate Increase over 3 years due to loss of good driver discount: $1,560

Total out of pocket cost: $1810

Had Michelle called us first, we probably would have advised her to get a quote for repairing the damage to James’ car. Because he wasn’t involved in an accident with another party, he can choose to repair the car himself or report the claim to insurance. The cost out of pocket could have been about $550.

James losing his good driver discount does more than just raise Michelle’s insurance rates… it limits her options. Many preferred carriers will not issue a new policy for a non-good driver (consecutive licensing in the US/Canada with no more than 1 point for 36 months). This means that she doesn’t have many options when trying to shop her policy for a lower rate and she’ll likely be stuck paying the hefty increase for the next 3 years.

Scenario 2

Here’s another example. A pipe burst in the wall of Mathew’s living room. He immediately shut off his water and rushed to the phone to report the claim. He pays his deductible and gets his wall and floor repaired.

  • Deductible: $1,000
  • Insurance company paid: $700

However, Matthew was unaware that insurance does not cover the cost of a new pipe and he didn’t realize that he would lose his claims free discount.

  • Cost of new pipe: $500
  • Loss of claims free discount over 3 years: $2,600

Total out of pocket cost $4,100

Even worse, if Matthew has another claim within the next 3 years… let’s say a kitchen fire causes $16,000 in damages and he makes a claim… He now has 2 claims within 3 years and will likely be “non-renewed” by his insurance company. Had he not made the smaller claim earlier, this would not be a concern for him. But now, he’ll have to find new insurance, likely with a non-standard insurance company and a really high rate. Had he repaired the damage and the pipe himself, his out of pocket cost could have been around $2,200.

When the damage is severe, it makes sense to report a claim and let your insurance company handle it. However, making a claim for a small amount may not be the best thing to do. Talk to your agent if possible before reporting a claim, he or she can advise you about your coverage, deductible and help you decide the best decision for your individual situation and policy.

For more information about claims or your policy, contact your agent at (562) 493-3521! After all, that’s what we’re here for.

*Written by Brittney Cook, Personal Lines Account Manager

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