Filing an insurance claim can be tricky, whether you’re a homeowner protecting personal property or a business owner managing commercial assets. While insurance is designed to provide financial protection in times of loss or damage, making multiple claims in a policy period can lead to higher premiums or even non-renewal of your policy.
By a landslide, this is the number one question we hear from our clients. Knowing when and how to make a claim is essential for maintaining a strong relationship with your insurer and avoiding unnecessary financial strain.
We’ve compiled this comprehensive guide to help you navigate the decision-making process when considering whether to file a claim.
Understand What Constitutes a Claim
Not every incident that results in damage or loss should be treated as a claim. It’s important to differentiate between what your policy covers and what’s better handled out of pocket.
Examples of valid claims might include:
- Severe storm damage to a roof or structure.
- Significant theft or vandalism resulting in major financial loss.
- Liability incidents where someone is injured on your property.
However, minor issues like a small leak, cosmetic damage, or losses below your deductible may not warrant a claim. Filing for minor repairs can flag you as a higher-risk policyholder without providing significant financial benefit.
The Impact of Filing Multiple Claims
Insurance companies track your claims history through a system known as CLUE (Comprehensive Loss Underwriting Exchange). Frequent claims within a short time frame can:
- Increase your premiums upon renewal. According to industry data, filing just one claim can raise premiums by 20% on average, while two claims within a policy period can lead to 50% or more increases.
- Label you as a high-risk policyholder. Statistics show that high-risk policyholders are 60% more likely to experience non-renewal or difficulty securing new coverage.
- Lead to non-renewal or difficulty securing coverage with other providers.
For commercial policies, multiple claims can also impact your reputation with insurers and potentially affect your business’s ability to secure future coverage at competitive rates. Your claims history leaves a trail—don’t let it turn into a CLUE for higher premiums! That’s why it’s critical to evaluate each situation carefully before filing.
When You Should File a Claim
Here are some scenarios where filing a claim is typically justified:
- Significant Damage or Loss:The cost to repair or replace exceeds your deductible by a large margin. For instance, the average repair cost can exceed $10,000 with severe storm damage—well above most deductibles.
- Third-Party Liability:If someone is injured or their property is damaged while on your premises, you’ll likely need to file a claim to protect yourself legally and financially. The average liability claim for injuries is $35,000.
- Catastrophic Events:Widespread damage from natural disasters, fires, or other large-scale incidents usually necessitates a claim.
When You Should NOT File a Claim
Avoid filing a claim in these situations:
- Minor Damage Below Your Deductible:If the cost to repair is less than or slightly above your deductible, it’s often better to pay out of pocket. For example, 40% of homeowners who filed claims for minor water damage reported increased premiums without significant reimbursement.
- Repetitive or Maintenance-Related Issues:Damage caused by neglect or lack of maintenance, such as a leaking roof that wasn’t repaired promptly, may not be covered and can raise red flags with your insurer.
- Uncertain Situations:If you’re unsure whether the incident is covered or worth filing a claim, it’s better to gather more information first.
Four Strategic Steps to Take Before Filing a Claim
Before contacting your insurance provider, follow these guidelines to make an informed decision:
- Assess the Damage or Loss. Take the time to evaluate the extent of the damage thoroughly. Document everything with photos or videos, and make a detailed list of the affected areas or items. This will be essential for your evaluation and potential discussions with your insurer.
- Get Estimates from Service Providers. Reach out to trusted contractors, repair services, or other professionals to get estimates for the cost of repairs or replacement. This will help you determine whether the loss exceeds your deductible and provide a clear idea of the financial implications of filing a claim.
- Review Your Policy. Read your insurance policy to understand what is covered, excluded, and your deductible. Some policies exclude certain types of damage, such as flooding or wear and tear.
- Consult Your Agent. If you’re unsure whether to file a claim, consider speaking with your insurance agent. They can help clarify your coverage, guide the next steps, and advise on how filing may impact your policy.
Tips for Commercial Policyholders
For business owners, filing a claim comes with additional considerations:
- Evaluate Business Interruption Coverage:If damage disrupts operations, calculate how much income you stand to lose and whether your policy covers these losses. Studies show that 40% of businesses without adequate interruption coverage fail to reopen after a disaster.
- Understand Liability Risks:Claims involving employee or customer injuries require careful handling. Work closely with your insurer to ensure compliance and avoid further complications.
- Track Maintenance Records.Insurers favor businesses that demonstrate proactive maintenance and safety measures, reducing the risk of denied claims. Businesses with clear safety protocols are 25% less likely to face liability claims.
Best Practices for Filing a Claim
If you decide to move forward with a claim, follow these steps to streamline the process:
- Report the Incident Promptly:Notify your insurer as soon as possible after the event. Delays can complicate the claims process or result in denial.
- Provide Accurate Documentation:Share all relevant information, including photos, repair estimates, and receipts for related expenses.
- Stay Organized:Keep track of all communication with your insurer, including claim numbers, adjuster names, and timelines.
- Be Honest:Misrepresenting facts or exaggerating damages can result in denied claims and potential legal consequences.
Final Thoughts
Filing an insurance claim is a balancing act between protecting your financial interests and maintaining a good standing with your insurer. By taking a strategic approach, understanding your policy, and weighing the long-term consequences, you can make informed decisions that benefit your personal and commercial interests.
Remember, insurance is a safety net, not a maintenance plan. Use it wisely to ensure you’re covered when you truly need it. If you’re ever in doubt, consult a trusted agent or advisor to help guide your decision.