Is it Worth Putting in a Claim?

Elliott Insurance Services    May 16, 2019
House Fire - Insurance Claim

This is a very common question when it comes to insurance. Most people realize there will be some sort of resulting impact for putting in a claim on their insurance policy. Whether it be a loss of a claims free discount or a rate change, there is usually some sort of cause and effect with putting in an insurance claim.

You can avoid having a claim effect your insurance policy by having a claim protection endorsement of some kind. In auto insurance you may have heard of an endorsement that is usually referred to as “Accident Forgiveness” or with home insurance the endorsement may be referred to as a “Claim Protector”. These types of endorsements will protect your claim free discount in the event of your first claim. There are always things to consider when it comes to any sort of claim protection endorsements.

  • They will only protect your claims free discount if you stay with the same insurance company.
    • This makes it harder to move insurance companies if you have had to use one of these endorsements on your policy.
  • If the claim was a result of an action that is excluded on your policy, the claims protection endorsements will not be applied. If this is the situation, they most likely won’t cover the claim at all. An example would be illegal activity.

When it comes to putting in a claim there are a lot of things you will need to consider. We put together this article to try to help you make the best decision for yourself and your family. Your insurance policy is there for you to be able to put in a claim in order to protect your financial stability. Although, if you are unaware of the resulting impact on your insurance renewal or what would happen if you try to switch insurance companies in the future, we simply wouldn’t be doing our jobs. We are here to inform you and help you make the best decisions in regard to your insurance policies. We can’t make these choices for you, but we can try to give you all the information that you need in order to make a properly informed decision. 

Will a Claim Affect Me if I Want to Change Insurance Companies?

Unless it’s a not at fault auto claim, a claim will definitely affect you if you want to switch insurance companies. If you had a claim protection or accident forgiveness endorsement that you have used on your policy in the last 5-9 years, the new insurance company would not honour that agreement you had with your old insurance company. They would have to use that knowledge that you have had a claim and rate you accordingly.

When it comes to home insurance, if you have had 2 or more claims in the last 5 years, it might even be hard to find an insurance company who would write the policy. If you do find a company to write the insurance policy, it will most likely not be an economically friendly premium. If you have had a water related claim in the last 5 years, the insurance companies will most likely have restrictions on the policy or they might not offer water coverage at all.

Deductibles and Claims

When you put in an insurance claim, you will most likely be required to pay your deductible on your policy. Insurance companies have deductibles on the policy as a whole, or they might have different deductibles based on the type of coverage. For example, water damage on a home might have a higher deductible than fire damage. On your auto insurance you might have a different deductible if it’s a collision claim, then you would if it was a comprehensive claim (windshield, fire, stolen, etc.). It’s very important to know what your deductibles are on your insurance policy and if there are any situations where the deductible could be higher or lower than the rest of the policy.

Is it Worth Putting in a Claim?

Once you have figured out what your deductible is, you need to make the decision if it is worth putting in the claim. You have to factor the resulting impact your insurance policy and if having to pay your deductible makes it worth the cost of putting in the claim.

Let’s pretend that your home has had been hit with some high-powered wind that has blown over part of your fence and has damaged apart of your shed. You have someone come and give you an estimate for the damage, and they have estimated that it would cost $2,500 to have everything repaired. You have a $1,000 deductible on your home insurance policy and the damage would be covered on your policy if you were to put in a claim.

Right away we know you will have to pay the $1,000 deductible. Now if you subtract the deductible from the estimated repair costs you are left with $1,500. Now if you have a claims free discount and no claims protection endorsements you will have to factor the amount that your insurance premium will go up on renewal without that discount. These discounts are different for every company and they range from 10%-20% discount. It will usually take 3 years of being claim free in order to start gaining back that discount. That means that you will be without that discount for at least 3 years on your insurance renewals.

If your discount was 20% for being claims free and your insurance policy was $1,000 a year for your home insurance, that would end up costing you approximately $600+ over those 3 years. If we subtract that $600 from the $1,500 we had left over, we are now left with $900.

Depending on your financial situation, that may be worth putting in a claim. Everyone’s financial situation is different, and some people might not consider that worth putting in a claim and going through that entire process. They might factor the hindrance of switching insurance companies with a recent claim or they might consider the fact that a larger situation might arise that they would rather use their insurance on.

On the flip side, if you had a sewer backup event happen in your finished basement and your estimates came back at $50,000 to $100,000; you wouldn’t mind at all paying that deductible or losing a claims free discount as it would be worth it to you in the long run.

Due to the variety of different types of claims, discounts, endorsements, and financial situations, it is always suggested you talk to your insurance professional if you are considering putting in a claim. Your insurance professional should be knowledgeable enough to give you the information that you need to make a properly informed decision.  If your insurance professional isn’t giving you the details or helping you with your choices, it might be time to sit down and explain your point of view with them, or switch to another broker that is able to meet your needs as a client.

Simply put, sometimes it’s not worth it to put in a small claim if you are financially able to pay for the damage. That being said, sometimes it is worth it to put in a claim to ensure that the work will be completed correctly and there will be no resulting damage that you didn’t consider. You should always have these discussions with your broker who can help you make the right choice for your family.

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