May 4, 2023
Insurance is a funny thing. I say that as a professional insurance agent too. It is a thing that brings about a lot of different emotions for people. I’d say for a majority of people it’s frustrating and can be kind of a big pain in the butt. Just another bill to pay without seeing any real value in it. That can especially be the case if you’ve never had something horrible happen to you. If you’ve never had to use it, it’s easy to see why it can be mainly annoying. Does that sound familiar
For other people, those who have been through something catastrophic, insurance is something you see real value in. Especially if the insurance company you use has come through for you. Someone that has been in a devastating fire or horrific car accident, insurance can bring about a whole different set of emotions.
The bottom line is that insurance is you definitely need, but never want to have to use. So that brings about another question, when should I use it?? Let’s dive into that question and break it down into home and then auto.
Home Insurance
Your home insurance is designed for big things. When you have that “oh shit” moment in your house. It is not designed for the small stuff, like a hole in your wall or a small leak with minimal damage. The harsh truth is that those small things come with the territory of being a homeowner. Things creep up and happen over time, especially wear and tear. You need to be prepared for that.
Insurance is meant for the wall falling. For the devastating fire that takes out a huge chunk or your entire house. When you come home from running errands to find your ceiling split open and water and debris cover your entire home (this seriously happened to my in laws). A good rule of thumb is that insurance is meant for the things that can ruin your life. It’s not meant for things that can just ruin your day.
Some people have the attitude of “well I pay for my home insurance so I might as well use it.” Okay, I get your point and I can definitely understand that mindset. However, that’s a dangerous attitude to have. Remember that at the end of the day, insurance is a business. Insurance companies aren’t non-profits. They don’t have any sort of obligation to cover your house, your car etc. You’ve seen those signs on businesses, mainly restaurants, that say “we reserve the right to refuse service to anyone.” Well, the same holds true with insurance companies. If you file too many claims in a short period of time, you can bet that they will non-renew you and decide they don’t want your business anymore. Every company is different, but a good rule of thumb is you start to get looked at pretty closely if you file more than 2 in a 3 year period. Sometimes things happen and happen often, however at some point an insurance company will say it’s time to cut our losses and move on from this insurer/insured relationship. Not only that, but it could be really tough to get coverage with another company and it’ll probably be pretty expensive.
So when should I file a claim if it’s bad to use it? Well, it all comes down to math. My first recommendation is that if something happens, you need to find out how much it’s going to cost to fix whatever happened. Get an estimate or call your insurance company to get an adjustor out there to evaluate it. Next, look at your deductible. That’s a huge thing to take into consideration too. Your deductible is basically the amount you pay out of pocket before the insurance kicks in. Lastly, you want to find out if your insurance is going to go up as a result, and if so by how much. Contact your agent, or if you’re with a company without an agent, give the 800 number a call and try to get details. For example, let’s say come home and find some damage in your home. You get an estimate and it’s going to cost $2000 to fix it. You have a $1000 deductible so that means you’re going to get $1000 from your insurance company. Next, you call your insurance company and find out you’re going to have a 25% premium surcharge for 3 years by filing the claim. To use round numbers, let’s say you’re currently paying $1000 per year. That means it’ll go up $250 per year for 3 years, which totals $750. You’d still be coming out ahead by filing the claim, but it’s pretty close. Could be a judgement call and a conversation to have with your agent/insurance provider.
Auto Insurance
We’ve got home down, let’s take a look at when you should file a car insurance claim. Statistically, a car claim happens when more frequently and is way more likely than a home insurance claim. In reality, it actually works the exact same way. If something happens on the auto insurance side, you want to follow those same three steps. Get an estimate of damages, consider your deductible, and find out if your rate is going to go up and by how much.
Auto insurance is something you definitely want to talk to your agent and insurance provider about. There are a few more moving parts. For example, your rate usually doesn’t go up if it’s something that falls under comprehensive coverage. That means vandalism, glass, damage from a fire etc. Basically anything other than from an accident. Some companies have accident forgiveness, although that’s NOT AVAILABLE FROM ANY COMPANY IN CA. Ask about that if you aren’t in CA because then yes file that first claim.
In summary, you want to take three steps to figure out if you should file a claim and if it’ll be worth it.
1: Get an estimate for overall damages
2: Consider your deductible
3: Find out if your rates will go up, if so by how much
Remember, insurance is meant for the things that can ruin your life, not ruin your day.