To Claim or Not To Claim

Posted by Farrell Agencies on July 28, 2017

To Claim or Not To Claim – Property Insurance

When you pay your home/farm insurance premiums regularly and on time every year, it may seem like you should be able to file as many claims as you want. However, every time a claim is opened on your policy there are adverse effects on your insurance premiums.  In order to have the benefit of the best coverages and keep premiums low, it is wise to be selective on the claims you would submit.  A good claims history results in lower policy premiums.

So how do you know if you should open a claim or not?  Call your broker to inquire on your coverages, deductible and the effect a claim would have on your premium.

Keep in mind that every insurance policy has a deductible, check your policy to see what your deductible is.  A deductible is “the portion of the loss that the insured is responsible to pay, and which the insurance company will deduct from the claim payment.” Common deductibles are $500, $1,000 & $2,500.  Your damage must be more than your deductible to justify submitting a claim.

Most companies offer a claims free rating for clients that have not incurred a claim for at least 3 years.  This claims free discount is removed when a claim is opened and the discount will not re-apply until the client is again 3 years claims free. The most common claims free discount is 15% but varies according to company and policy type.

Lets show an example:  A home insurance policy with a yearly premium of $1500 including 15% claims free discount and a $500 deductible.

Example #1 – Possible claim – Electrical surge shorts out and damages TV, cost to repair/replace $1000

♦  Deductible of $500 applies PLUS $675 (15% of $1500 premium for loss of claims free for 3 years ($225 x 3)) = $1,175 total cost to submit claim – when you look at the numbers it costs the insured more to submit the claim than to just replace the $1000 TV on their own

Example #2 – Possible claim – Electrical surge shorts out and damages kitchen appliances and causes food spoilage, cost to repair/replace $6500

♦  Deductible of $500 applies PLUS $675 (15% of $1500 premium for loss of claims free for 3 years ($225 x 3)) = $1,175 total cost to submit claim – as you can see this claim would be beneficial for the insured.

So how do you know if you should open a claim or not?  Call your broker to inquire on your coverages, deductible and the effect a claim would have on your premium.

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