Things You Should Know BEFORE You Submit Your Claim

You’re probably reading this because you recently had a car accident or suffered some other kind of loss to one of your vehicles, your home, or your business.

And you’re wondering…

  • Should I submit a claim to my insurance company or not?
  • Will there be any negative consequences?
  • Will my price go up? By how much?
  • Can my policy be canceled – what happens then?

These are very important questions. And while every situation is different, we’d like to provide you with some inside information to help guide you to your answers. But, admittedly, you can’t get a specific answer to your specific situation in this report.

Why not? There are two reasons.

1. First, many factors determine the true impact of a claim on your policy. For instance:

  • Each kind of insurance is subject to specific province laws and regulations – especially involving cancellation,
  • Each insurance company has its own internal rules and practices,
  • And your personal claims history and circumstances will trigger those rules and practices differently than, say, your neighbour’s.

2. Second, once you have the facts and know what the impact will be, the decision to submit the claim or not is truly personal. What’s right for your neighbour isn’t necessarily right for you. Given the same facts, you each might make a different decision.

If you’re concerned about the potential impact of submitting your claim, contact us and discuss your situation! (This is just one of the many benefits of doing business with Alpine Insurance and our dedicated team instead of a faceless 1-800 number with automated messaging).

We’re here to advise and counsel you and to explain how your insurance works. We’ll give you the facts BEFORE you submit your claim and help you make the best decision for you.

But wait…

Isn’t This What My Insurance Is For?

Yes, insurance pays for claims. You elect the protection options and limits you want, you pay your premium, and your insurance company pays for your covered claims – that’s how an insurance policy generally works.

Then why all this talk about the “consequences” of claims? Why can claims increase my price or even get my policy cancelled? That’s what insurance is for!

That’s absolutely true. However, it’s just not the whole story.

While we don’t want to turn this report into an insurance manual, this is a common question I get from clients, so we want to explain it to you here very simply.

How Does Insurance Work?

Insurance and the price you pay for it is based on risk – the risk of a loss occurring. A high risk of loss means higher prices are necessary to pay for those increased losses. And low risk of loss means lower prices.

Now, what determines the level of risk? Many things, but claims experience is one of the most important.

Statistics show that people who have a claim are more likely to have another claim. So, when compared to someone with no past claims, someone with claims on their record represents a higher risk of loss to the insurance company.

And you already know what a higher risk of loss means… yep, higher prices!

Therefore, you now represent a higher risk of future loss to your insurance company when you have a claim. And sometimes, that increase in risk will be met with a price increase. This allows the company to keep prices lower for people who represent lower risk.

Before filing a claim, here are the more important factors that come into play.

The Size of Your Loss

If it’s not obvious, this discussion about whether or not to submit your claim really only comes into play with small losses. Basically, losses that come close to your deductible.

Clearly, if you have a $20,000 car wreck, or $50,000 of damage to your home, or $35,000 of inventory stolen from your store, it’s highly unlikely that you would even consider not submitting that claim. That IS what you buy insurance for!

On the other hand, small losses can sometimes hurt worse by submitting them. The consequences of submitting the claim may outweigh the money you receive from the company. Sometimes it just makes sense to pay your loss yourself and avoid the consequences of submitting a claim.

Your Deductible

Your deductible has a direct impact on whether you should submit your claim or not. Your deductible is the amount you pay out-of-pocket toward the amount of your loss. The insurance company then pays the balance.

For example:

  • Let’s say you suffer $3,000 of damage to your home under a covered claim and your deductible is $1,000. In this case, you pay $1,000, and your insurance company pays the remaining $2,000.

If the amount of your loss is less than your deductible, there’s no point in submitting your claim. You’re going to pay it all anyway, so why report it?

For example:

  • If your deductible is $1,000 and you suffer $800 in damages, then your insurance company will not pay anything. The amount of damage is less than your deductible. You’re responsible for the first $1,000, so you’re responsible for the full $800 in this case.

But here’s where it gets a little tricky.

What if the loss is just a little bit more than your deductible amount? What if your deductible is $1,000 and the damage is $1,200?

In this case, your damages are only $200 more than your deductible. Therefore, you’ll receive only $200 from the company. Is it worth getting $200 to suffer the consequences of submitting the claim?

It depends on what those consequences are!

Depending on the type of loss and your personal situation, this claim may cause an increase in your rates, possibly a significant increase. It may cause your policy to be non-renewed.

Once you know the exact situation for your circumstances, you may find that it’s less costly for you to pay the additional $200 out-of-pocket and keep the claim off your policy. Unless you know what the impact will truly be, you can’t make a good decision.

Did Someone Get Hurt?

Many incidents involve only property damage. For example, maybe the wind blows some shingles off your roof. Or perhaps you back into a pole in a parking lot. The point is nobody’s hurt, and there are no injuries.

When your loss involves only property damage, it sometimes makes sense to take care of it yourself and avoid the consequences of submitting the claim. You pay for the damage, and it’s over.

However, when someone’s injured, it’s never a good idea to keep that to yourself. Why Because no matter how minor the injury may be, the injured party can come back and sue you many months or even years later. If that happens and you didn’t report the claim when it occurred, your insurance company can legally refuse to defend you in the lawsuit and deny any payment as well.

Your policy requires you to report your claims promptly so the company can control the claim. If you don’t, they can deny coverage. In the case of a small property loss, nobody’s ever going to come back and sue you. But when someone’s injured, you never know. Defending yourself in court is expensive, even if you win, so don’t take a risk when someone’s injured. Always report those claims.

Company Rules and Practices

Regardless of what TV commercials try to tell you, every insurance company is different. They all have their own rules, practices, and rate plans. And they all treat claims differently, too.

Some companies have a price for just about everybody. That means that no matter how bad your claims record gets, they’ll keep you insured. Of course, your price will go up and up to match your claims experience!

On the other hand, some companies don’t have a price for everyone. When your claims record gets too bad, they’ll non-renew your policy (within the circumstances allowed by law). When that happens, you’ll be forced to get insurance elsewhere, and you’ll likely pay a significantly higher price with a new company

Insurance Laws

Insurance laws are in place to protect you, the consumer. Among other topics, those laws define the circumstances under which a policy can be canceled or non-renewed. Depending on the type of insurance, these laws can provide you with a lot of protection or very little.

For example:

  • Personal car insurance is generally well protected under the law. An insurance company can’t cancel or non-renew a policy simply because they no longer want to insure you. The law states the conditions under which cancellation is allowed.
  • However, other lines of insurance like business insurance have fewer such defined cancellation criteria. In many cases, the insurance company can non-renew your policy because they don’t want to keep your risk on their books.

If you’re wondering whether you should or shouldn’t make a claim, there are no clear-cut guidelines for making this decision. Laws, company rules and practices, the size of your loss, your deductible, your personal claims history, and your experience all mix to create your unique circumstances.

Before you submit a claim, give us a call first to get the facts for your specific situation to help you make an informed decision.


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