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Should You Make an Insurance Claim
It s your right but not always your best move
Chris Gash My daughter and her family had been in their home less than a year when big storms swept through their neighborhood last August. It rained in their kitchen, living room and playroom, causing significant damage. My son-in-law called to ask, “Should we file a claim? We’re so new in this house. What if they raise our rates or drop us altogether?” Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine. His worries were legit. can’t raise your rates or drop you mid-policy just for filing a claim, but at renewal time they can raise your rates as much as 20 percent. If you’ve filed multiple claims, they can even decline to renew your policy, says the Insurance Information Institute trade association. The same is true of auto policies, which typically cost $637 more a year for customers who were at fault for an accident, according to Bankrate.com figures. And yet, as I asked my son-in-law, isn’t that why you buy insurance? Filing a claim is your right as a consumer. And fewer than half of all property claims result in a rate hike, the industry reports. Here’s how to decide whether your claim is worth the risk. 1 Weigh the type of claim
You’re more apt to see a rate hike after a claim for personal injury or for an incident the insurer thinks might recur or was due to negligence. “The easiest way to get your policy nonrenewed is to report a couple of water damage claims from plumbing leaks,” says former insurance agent Bill Wilson, CEO of InsuranceCommentary.com. AARP Membership — $12 for your first year when you sign up for Automatic Renewal Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine. Entertainment $3 off popcorn and soft drink combos See more Entertainment offers > You’re more susceptible to rate hikes if you have a history of filing claims, or if previous owners filed multiple similar claims on your home. Insurers can see the claims record on both your auto and homeowners insurance via what are known as CLUE reports. (That stands for Comprehensive Loss Underwriting Exchange.) You can for free. 2 Determine what s affordable
When home or auto damages are only slightly more than their policy’s deductible, most people choose not to file a claim. The total cost they are willing to pay before calling in the insurance company is known, in industry parlance, as a “pseudo-deductible.” It includes their actual deductible and the extra amount they are willing to eat. How high should you go? Derek Tharp, an assistant finance professor at the University of Southern Maine, who has studied pseudo-deductibles, suggests that whatever the actual deductible may be, an ideal pseudo-deductible for homeowners ranges from $500 to $1,500. You may want to go higher if you can afford to. 3 Notify your insurer
Even if there’s no damage or injury, . “I always report any auto accident unless I back into my own home,” Wilson says. Here’s why: You might tap somebody’s bumper and not see any damage to either car. Later on, though, the other driver might report an injury or a bigger car problem. In such a situation, alerting your insurer promptly may protect you from a scam or from the denial of a claim because it wasn’t filed properly. In many states, insurers can’t raise premiums based on reports of an accident without a claim, unless you were cited for a traffic violation; even in other states, insurers are unlikely to raise your rates just because you alerted them. AARP Membership — $12 for your first year when you sign up for Automatic Renewal Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine. More on money AARP Membership — $12 for your first year when you sign up for Automatic Renewal Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine. AARP VALUE & MEMBER BENEFITS See more Health & Wellness offers > See more Flights & Vacation Packages offers > See more Finances offers > See more Health & Wellness offers > SAVE MONEY WITH THESE LIMITED-TIME OFFERS