I’ve Had an Insurance Loss, Should I File a Claim?

When you have a loss on a peril that is covered by your insurance, like fire or theft, you will need to decide whether or not to make a claim on your policy. Now, if your loss isn’t higher than your deductible amount, you would have to pay for it yourself regardless, but what if the loss is only slightly above that deductible, or what if the loss is your fault? In those cases, should you make a claim and get reimbursed by the insurance company? Let’s run through some issues herein.

The first item to understand is that making claims on insurance policies should really be saved for when you have a major loss. If there is a fire, theft, or other covered peril and the loss is $4,000, or $8,000 or $15,000, those are large amounts and paying them yourself will significantly impact your financial situation. So in those cases, it probably makes sense to make the claim with the insurance company and have them reimburse you for your damages.

But if the loss is small, like $300, you might consider just absorbing that cost yourself and not making a claim. You can and should discuss this openly with your insurance agent. The reason you might want to hold off on filing a claim is because your insurance rates may go up the following year as a result of making that small claim. And if you make many minor claims, your insurance premium will likely be heading north the following year. This is because it costs the insurance companies a lot of money to process claims and they don’t want customers to continuously make little claims, so they might raise your rates in hopes that you will find a new carrier or drop their coverage, if possible.

Now you might think, "Well, I will just switch carriers if they raise my rates." But unfortunately, that won’t solve the problem. Most major insurance companies are part of a network that tracks claims that a person makes on policies. It’s called the C.L.U.E. – Comprehensive Loss Underwriting Exchange and keeps track of claims made by people, like yourself, and on properties upon which the claims were made.

This means that if you try to switch insurance carriers, the new carrier may pull a C.L.U.E. report and see your claims history and decline to offer you coverage, or they might offer you a higher rate on your insurance coverage. You need to beware that the insurance companies are watching you, as they should be. The problem is that those who file frequent claims, and many of those may be questionable claims, run up the cost of insurance for the rest of us. To keep rates lower and competitive against other carriers, the insurance companies avoid offering policy coverage for these repeat offenders, and you could be viewed as a "repeat offender" if you file too many small claims.

These principles really apply to all types of insurance coverage that you might have. Making a claim on an insurance policy should be reserved for when the big one hits and would cause you a significant financial hardship. By taking that approach with insurance, you should be able to enjoy lower insurance premiums going forward in your life. This is because the insurance companies will be glad to have you as a customer and will work hard, via offering you lower policy premiums, to get your business.

So think this through when you have a loss, and remember that you can openly discuss this with your insurance agent, and then you can make the best decision for your circumstances.