If Bill Shakespeare were alive today and writing about the destruction of MacBeth’s Castle, Cawdor, he might have penned his famous lines as “to file or not to file” – an insurance claim, that is. It may not be a problem on the scale of Hamlet’s, but it is a question that plagues a lot of folks today and simple answers are not easy to come by for most people.
Why not file an insurance claim when the general point of insurance is to manage risk, limit loss and make the policyholder whole? Well, the problem with risk is that it changes with experience. If you have a loss – say an article stolen from your yard – you may see it simply as an unfortunate event while the underwriter at an insurance company may view the loss as an indication of your propensity to leave valuable items lying around unprotected. From that perspective, what the underwriter sees is an increased risk of loss and an increased risk of loss is inclined to mean an increase in premium.
Depending on where you live and who you believe, one claim may not greatly impact your premiums. Some authors contend that a single claim is unlikely to impact your rates, except for claims like dog bite which may clearly signal an underwriting issue. Other national surveys seem to indicate there is a demonstrable increase in premiums following a claim and that the increase varies by state. In Texas, for example, a single claim on your homeowners insurance will not result in an increase in premiums and that is by regulation. In other states the situation differs, sometime markedly. Observed increases in New York, Massachusetts and some other states are low – below 10%; increases in Maryland and Minnesota average about 20% after a single claim. Washington home insurance premium increases are about in the middle of the pack – 13%.
Whether your premiums increase, and how much, may also be a function of your insurer, the length of time you have been a policyholder and the type of claim. One prominent insurer representative says “if you haven’t been with (insurer) for as long as nine years, you’ll start to see your premiums increase if you have a qualifying claim.” Weather related claims are exempted from this policy for this insurer and others which further underscores the notion that the increase in premiums is related to the underwriter’s perception of increased risk. The underwriters are concerned with homeowners who file claims for damage caused by faulty plumbing and fail to make proper repairs.
So, if weather related claims are less likely to affect your premiums, what claims are most likely to raise them? The answer, logically, are those most related to incidents a policyholder can control. These include dog bite claims, water damage and slip-and-fall claims. Each of these may be an indicator the homeowner is not holding up their end in managing potential risks.
What can help? Take the largest deductible you can afford. Not only will it help keep your premiums down, but having a high deductible will keep you from presenting small claims that may adversely affect your premiums. You can also check with your insurance agent for advice on filing. Their experience in working with individual insurers can be invaluable in deciding whether to file or not.
Oh, and if you are MacBeth and a busted pipe floods your finished basement or your castle goes up in flames, don’t hesitate to file a claim. The claim will give you the money to repair the damage and will greatly outweigh any potential increase in premiums. And that, of course, is the point of insurance.