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When to File an Insurance Claim
The doís and doníts of filing insurance claims

You have insurance for your vehicle and your home so that if something happens and they are damaged, you can make a claim to have the damage fixed. There is a lot of misinformation spread about insurance claims, however, and many people fear making a claim and having their premium rise to an unaffordable level. The following information will help you determine when it is most appropriate to make a claim.

 

Automotive Insurance Claims

 

The fact that some people see annual premiums rise after making a claim is the reason why many people are afraid to use their insurance, even if their vehicle is damaged.

 

“A single “at-fault” claim will result in an average increase of 38 percent in your annual car insurance premium, according to insurancequotes.com, and a second claim could nearly double what you pay,” states Paul A. Eisenstein from NBC News. “…most consumers could be socked hard, especially those with less than stellar driving records, the study found.”

 

This means that a small claim — a few hundred dollars — for an accident where you were at fault will likely not be worth the increase in the cost of insurance. Furthermore, it’s not wise to file a claim smaller than your deductible.

 

Another reason to forgo making a small claim is the fact that having more than one claim per year can be very bad for your premium, with the study finding an average increase of 86 percent for two claims in one year. Forgoing a small claim means that if you have a second accident where you’re at fault later in the year and need to make a large claim, your record will only show one claim.

 

These facts mean that if you’re at fault in an accident, your best chance of profiting is if the amount that your premium may increase will be substantially smaller than the amount of the claim. Another time you should consider a claim is if you’re not at fault for the accident. If this is the case, a claim is likely in your favor.

 

“The other critical factor to consider before contacting your insurance agent is whether you’re at fault or not,” states Eisenstein. “If the other motorist was found to have caused a crash your insurance company normally won’t penalize you.”

 

This is likely true even if the person who caused the accident doesn’t have insurance or is under-insured. Your insurance may kick in to cover the damage in this case, but you typically won’t be penalized with a premium increase.

 

Another time when filing a claim may be in your benefit is if you have not made recent claims or if your insurance company offers a free pass for your first accident.

 

“With some companies, you're only eligible after you've been accident-free for a number of years,” states Gregory Karp from Spending Smart, the Chicago Tribune. “If your insurance has this feature, lean more toward filing a claim.”

 

Last, if there were injuries resulting from the accident, you should lean toward filing. If there is the possibility that someone involved in the accident could claim injury, then filing a claim will help to protect your interests in a lawsuit.

 

Homeowners Insurance Claim

 

If you’re unsure whether you should make a small claim or pay out of pocket, there are no clear rules to tell you exactly which is the best choice. So how do you decide? One of the biggest determining factors is the size of the claim.

 

“The purpose of insurance for consumers is to protect them from financial disaster, not small expenses,” states Gregory Karp. “Experts agree it is not wise to make small claims, although they disagree on what small means. To some that's $500. Others say $1,000. It will depend on what you can afford to pay out of pocket, experts say.”

 

Another factor is the length of time you have held the policy. If you’re a longtime policyholder, your insurance company will possibly be more lenient than with people who file soon after opening a policy.

 

If you would like advice about funding repairs to your vehicle or home, or if you have any other financial questions, please don’t hesitate to give us a call.


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Published by Central Bank of Kansas City
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Disclaimer - All content contained in this newsletter is for informational purposes only and should not be relied upon to make any financial, accounting, tax, legal or other related decisions. Each person must consider his or her objectives, risk tolerances and level of comfort when making financial decisions and should consult a competent professional advisor prior to making any such decisions. Any opinions expressed through the content in this newsletter are the opinions of the particular author only.  This is an advertisement.
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