This week I was involved in an accident that left me with a broken wrist and a broken nose. The insurance company sent a adjuster out to my house to assess the damage, and he told me the cost of repairs. He was quite friendly, and he seemed to know what he was talking about. I did some quick research before I signed my insurance agreement, because I had some questions, and I wanted to make sure I understood what I was agreeing to.
After some time researching, I have realized the insurance industry is a sickly beast, with many companies selling a watered down version of the same product. The industry has undergone a few changes in the past few years: the face of the industry has changed from a red to a blue hue and the companies have moved to a more interconnected world.
My first mentor in the insurance industry explained insurance rates in terms of prudent people and, of course, the opposite of prudent people. He was a very careful man. I was in the other category at the time.
By gradually internalizing his lessons, I became a more cautious person. Becoming a father has also helped me in this regard.
Now, on the highway, when I see the gleaming grille of a truck in my rearview mirror, I change lanes. Sometimes I even stop to let an aggressive driver pass. If another car hits my car because the driver is coming from behind, it’s not my fault. That doesn’t mean I couldn’t have prevented the accident.
Changing lanes is a prudent option. Avoiding a risk by passing it by is a prudent decision.
Frankly, in many cases claims cannot be avoided and being careful (or not) has little to do with the cause of the claim. Accidents can happen (and do happen).
Often damage can lead to a higher rate on a contract renewal. In some situations, the insurer may even decide not to renew the policy. In other words: Your policy will expire at the end of the term unless your insurer renews it.
By raising rates or not renewing policies, insurance companies are not trying to punish policyholders who have suffered losses. Instead, they list a risk that they cannot insure or cannot insure at the same rate you were paying before. By raising their rates, insurance companies can encourage us to be more careful.
This is what insurance might look like after you make a claim.
Steps to file an insurance claim
If you need to make a claim, you should do so before the accident, not after or during it. The claims process may differ depending on the type of policy, but there are some similarities between auto and property insurance claims.
Both policies include a deductible, which means you must pay a certain amount to repair or replace the damaged item before the insurance company will refund the balance. Both policies can also cover property damage and personal liability.
First, let’s look at the basic steps of an auto insurance claim:
- Provide first aid on scene for injuries or safety issues. If anyone is hurt, call an ambulance. If gasoline leaks from your vehicle or a fire has broken out, warn others to get to a safe place and call 911. If there are no injuries and you think you should file a claim, exchange insurance information with the other driver. Also contact the police. Your insurer may require a police report.
- Contact your agent or insurer. When someone is injured or significant damage is done to your car, someone else’s car or someone else’s property, insurance plays an important role. However, for minor parking accidents that leave only a few scratches, you may not need to file a claim. Even if the other party is at fault and your car is damaged, you can file a claim with their insurer. The latter strategy saves you the deductible, but is only suitable if the other party to the accident is at fault, for example. B. If you’re parked. If you contact your local agent, they will put you in touch with a claims department, but they can also explain your options in advance. In some cases, you may not need to litigate at all.
- Use the mobile app to document damage. Many insurers now offer a mobile app that you can use to process and track your claims. In many cases, you can also use the app to take pictures of the damage and the area around the accident. The location of vehicles or signs can make a difference. If you don’t have the application installed, use your phone to take pictures if necessary. Mobile apps can also help you book your rental car and track your claim.
- Find the documents you need. Your insurer may ask for a copy of the police report. The procedure for obtaining a copy of the police report may vary by jurisdiction. In many cases, a copy can be obtained online.
- Report the loss immediately. Your auto insurance policy requires you to report claims immediately, as described in the Policyholder Responsibilities section of your policy. If you do not report a claim immediately, the processing of your claim may be delayed. The insurer may even refuse to pay if you do not report the loss within a reasonable time.
- Complete all claim documents completely and honestly. An error in your documents or incomplete information may result in a delay in processing your application. In many cases, your claim will be verbally acknowledged and recorded by the insurer.
Similar measures apply to household insurance.
- Make sure everyone is safe. Certain types of damage to your home can put your family at risk. Keep everyone away from the damaged area if, for example, there is structural damage or a health problem. B. A gas leak. Contact the emergency service if necessary.
- Take corrective action. If it is possible to safely slow down or prevent further damage, you should do so. For example, if a pipe bursts, you can shut off the water in your home. If the underside of your roof is damaged, you can cover the damaged area with a tarp to keep nature out and prevent further damage to your home.
- If you are the victim of a crime, for example B. a burglary, report it to the police. Your insurer will likely require a police report.
- Contact your agent or insurer. Many people who have a claim first turn to their agent for advice. As with car insurance, there are times when you may choose not to file a claim. Many buildings insurance policies have a deductible of $1,000 or more, the amount you must pay before the insurer will cover the additional cost of repairs. In case of minor damage you can pay the repair out of your own pocket.
- Working with an insurance agent. If you decide to file a claim, your insurance company will send an expert to estimate the cost of repairs and discuss the next steps for repairing your home.
- Keep records carefully. Document anything missing or damaged. You must give this information to the claims representative. If you had to move temporarily because of damage to your home, keep receipts for expenses. Most home insurance policies provide coverage for additional living expenses as a result of a covered event.
- Act quickly. Both the appeal and the initiation of the legal action itself must be done quickly. A delay in any of these items may affect or delay the processing of your application. Here’s a stupid example: If you have a burst pipe under your sink and you leave the water in the leaking pipe until the expert comes a few days later, you may have trouble making a claim. Part of your policy covers the policyholder’s obligations, including reporting the loss immediately and taking reasonable steps to prevent further loss.
Situations in which you cannot complain
Once you report a claim to a contractor, it becomes part of your insurance history. If you cancel the request, it may still appear as an unpaid request. For some insurers, this may affect your rates. Consider your options before making a claim.
An excess is payable for material damage and financial loss. The excess is the part of the insurance payment that you pay yourself. For example, $750 is a typical deductible for collision coverage in auto insurance.
If your car sustained $1,000 worth of damage in a collision, you may have to pay for it out of pocket. In the event of a claim, only $250 will be paid out because your insurance has a $750 deductible.
If you face a rate increase due to the damage itself or the loss of your no-accident discount, over time the cost will likely exceed the $250 you could have paid out of pocket for the repairs.
However, this no-claim strategy can sometimes backfire. I once bought a used BMW. After the weekly wash, the car shined in the sun with a silvery glow. When I stopped for a right of way sign because there was a traffic jam, a nice lady in an old Plymouth reversed onto my almost new BMW.
There was no structural damage to either car, but the rear bumper of mine looked uneven, with the previously perfect silver paint deeply torn out by rusty screws on the Plymouth’s front license plate.
The nice woman begged me not to report the accident to the insurance company and said she would pay for the damage out of her own pocket. I gave in and wrote down his phone number. I’ve been very busy with work, and it took me a few weeks to get some estimates together.
When I called this nice woman to ask for an estimate for the repair ($1,300), she connected me with her obviously less nice husband. From the sound of his voice, I estimated that he was five or six feet tall, maybe more. He told me in no uncertain terms that they would not pay for the damage and that I should not call again.
In this case, I had no story. I paid for the repairs myself. Lesson learned. If I had known then what I know now, I would have asked for his insurance card just to be sure. With this information, I can file a claim with their insurer if necessary.
How a claim is paid
The calculation of the compensation may depend on several factors. First of all, you need to consider the amount of the deductible. Remember that the insurer will deduct this amount from the compensation payment. Different types of coverage may have separate deductibles, and sometimes certain types of claims have separate deductibles.
If your car is z. B. has collision and comprehensive insurance, there is a different deductible for each of these types of coverage. However, it is likely that your application will fall under one or the other category (not both). You can set a standard excess for damage to your home.
However, many policies have a separate excess for damage caused by certain hazards, such as wind or hail. Expect to pay at least some of the damage through the deductible.
The type of insurance you have for the damaged items will also affect how the amount of your claim is calculated. For example, most auto insurance policies use actual cash value coverage, which means that the insured value of the vehicle is deducted from depreciation.
This does not affect coverage for newer vehicles unless the cost of repairing the damage is close to the value of the vehicle. But for older cars with extensive damage, the cost of repairs often leads the insurance company to recognize the car as a total loss, resulting in the payment of the insured value of the car minus the deductible.
The following paragraphs explain how certain types of damages may be claimed in a lawsuit:
- New car damage: For newer cars that have not had much time to depreciate, the insurer will pay to repair damage that is less than 70-80% of the insurable value of the car. Because costs are often higher when new damage is discovered during repairs, insurers set the limit for establishing a total loss lower than the insured value of the vehicle. The insured value and the percentage for the calculation of the total loss apply to both the comprehensive and all-risk insurance.
- Damaged old car: Older cars are generally considered total losses because their insured value is lower due to wear and tear. However, the cost of repairing older cars is not necessarily much lower than that of a newer car.
- A branch falls on your house If a tree or branch falls on your home, there are two types of insurance coverage for the damage. The house itself is insured at replacement value, meaning the insurance company will pay to repair the damage without deducting depreciation. However, if the wood has also damaged your furniture and appliances, these items are often insured at their actual cash value. This means you get a depreciation allowance. Some insurers offer the option of protecting personal belongings at full replacement value, but this option must be in place before a claim is made to be eligible.
- Wind damage to roof and facade: For wind or hail damage, your deductible may be higher than for other types of damage to your home. But wind and hail damage usually affects the roof and siding, which can be covered differently. As an integral part of the construction of a home, siding is generally covered at full replacement cost, without deduction for depreciation. However, a roof that wears out over time does not always cover the full cost of replacing it. On the contrary: The insurance value of an old roof can be much lower than that of a new roof.
- Flight : Theft coverage may vary depending on what was stolen and how the items were insured. For example, if someone stole an old sofa from the basement of my uncle’s house, he would look like a fool. It costs nothing and smells a bit like the cologne my uncle used to wear. Insurance won’t pay much for the old couch, and my $1000 deductible won’t pay if the couch is the only thing stolen. Jewelry and other valuables may qualify for full replacement coverage, although your policy’s loss limits may preclude full coverage.
In many cases, insurers limit the payment of an insurance claim based on whether or not you made the repairs. For example, a well-known insurer I worked with settled a claim for a building insurance policy in several steps. If the damage to the house is not repaired, the insurance company will pay a lower amount for the damage based on the depreciated value.
Once the repair was completed, the insurance company paid the full replacement value of the repair and covered the remaining difference.
However, some policies may reimburse you directly for the entire loss, even if you decide not to rebuild your home. Policies vary, so ask your appraiser what the process is so you can make an informed decision about repair or replacement. In some cases, the insurer may even allow you to make the repairs yourself by paying you directly.
Whether it’s car or contents insurance, count on a few dollars. None of the policies provide 100% coverage. They still have some interest in the game. Instead, auto and contents insurance can serve as an effective protection against significant losses that can affect your financial situation for years to come.
Will the loss affect my interest rate or credit rating?
A claim for your home or car insurance could result in a rate increase. However, the debt does not affect your credit history. Since most insurers in most states base a portion of their rates on credit history, there is often confusion about the relationship between insurance and credit.
An insured event does not affect the criteria used in credit scoring, such as. For example, your payment history, credit usage or the number of credit accounts you have.
There are two main reasons why insurance rates can rise after a claim.
- You lose your no-claims status. Many insurers offer an additional discount if you have had no claims for a certain period of time. The claim resets the time to zero and removes the additional discount. Even if your rate doesn’t go up (depending on the rating factors), your premiums may still go up.
- Its use is increased as the risk increases. A friend of mine had a dog that was a bit temperamental, maybe even unstable. I often wondered if the dog would bite me. Although cautious, I petted the dog because I have an incurable attachment to animals. I was bitten by a dog once. I was fine, but now I approach dogs with more caution. Insurance claims and rates work in a similar way. As long as the application has not been submitted, it is not known what risk we run. Once the claim is made, the risk is confirmed, often resulting in higher rates.
Each insurer decides when (and how much) to raise its rates based on claims, and these increases are often related to the amount or frequency of claims. The consequences of a claim may vary from one insurer to another.
Higher claim amounts or frequency of claims can also have a greater impact on rates. In some cases or for certain types of claims, the insurer may also decide not to renew your policy, forcing you to find another insurer when your policy expires. For example, a drunk driving accident is a common reason for not renewing a contract.
Some sources speak of a typical 30% increase in insurance premiums after an accident. In several states, the average increase is much higher. But you may not even notice the increase.
Small claims can have little or no effect. Many insurers also offer an accident waiver, which is an addition to the policy that allows you to avoid the accident surcharge you would have had to pay.
Is it wise to change supplier after a claim?
If your insurance company increases its rates after a claim, don’t hesitate to compare prices. You should look around even if you don’t have a claim. Your current insurer may know you are shopping around, as many insurers collect data on their customers. However, the purchase will not affect your rates with your current insurer.
Use Policygenius to compare rates from leading insurers. With Policygenius, you can choose your insurance options online or even combine your auto and home insurance for additional discounts.
Your insurer is contractually obligated to cover losses as long as the policy is in force. For example, if you change insurers on the day after a claim is reported or one month after a claim is reported, the change of insurer will not affect your coverage for a claim that occurred during the policy period.
However, the loss will not be hidden from your new insurer. Insurance companies use a common database to report claims history. You can access this database called Comprehensive Loss Underwriting Exchange (C.L.U.E.) or a report called CLUE Report. This database and other similar sources serve as a data source for the industry and document loss data, amounts and related information.
Additionally, all property and casualty insurance companies ask about your claim history when you purchase insurance. Misrepresentation (including omissions) can affect your coverage. In some cases, an application may be rejected for misrepresentation.
In other cases, the insurer may change your rates to reflect the actual risk if it determines that the information provided in your application was incomplete or incorrect.
Expenditure management as claimed in application
Often a disaster teaches us that we can be even more careful. Whether it’s damage to your car or your home, there may be ways to reduce the risk of such situations occurring in the future. In other cases, there may have been no way to avoid the risk.
You can cut off a branch threatening your roof, but you can’t prevent a lightning strike.
Consider using a franchise system as a way to control costs. Since the deductible is the portion of the damage you pay, choosing a higher deductible often results in lower rates for larger claims.
Many people prefer to put their savings in a separate emergency account that can be funded with their own money in the event of a disaster.
You can also make purchases. In many cases, you can save money by switching insurers. Each insurer has a different risk rate, so you can find lower rates after a claim by simply switching companies.
Policygenius makes buying insurance a breeze. If you need auto or home insurance, or even life or health insurance, you can easily compare options online or work with an experienced Policygenius insurance agent to choose the best coverage for you and your family.
Frequently Asked Questions
How much does your insurance go up after a claim?
The amount of your insurance premium will increase after a claim.
Will my insurance premium go up if I make a claim?
Insurance companies are not allowed to charge more for a claim if you have a pre-existing condition.
What happens after you file an insurance claim?
After you file an insurance claim, the insurance company will send you a check for the amount of your claim.
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