Your Insurance Claim Checklist

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. You’re probably wondering:

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

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.

The bottom line is this that if you’re concerned about the potential impact of submitting your claim, please contact us and discuss your situation. We’re here to advise and counsel you and explain how your insurance really works.

Submitting a Claim

Essentially, insurance is for paying claims. You elect the protection options and limits you want. You pay your premium. Your insurance company pays your covered claims. That’s the deal.

Then why all this talk about the “impact” of claims? Why can claims increase my price or even get my policy canceled?

Insurance, and the price you pay for it, is based on risk: the risk of a loss occurring. High risk of loss means higher prices are necessary to pay for those increased losses. Low risk of loss means lower prices.

Lots of things determine the level of risk. And 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.

The Size of Your Loss

There are many factors that determine the true impact of a claim on your policy:

Each kind of insurance is subject to specific provincial 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.

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

But small losses can sometimes hurt worse by submitting them. The financial impact of submitting the claim may outweigh the money you receive from the company. Sometimes, it makes sense to pay your loss yourself.

Deciding on Your Deductible

Your deductible is the amount you pay out-of-pocket toward the amount of your loss, and it has a direct impact on whether you submit a claim or not.

For example, let’s say you suffer $3,000 of damage to your home under a covered claim. And let’s say 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 to submitting your claim. You’re going to pay it all anyway, so why report it?

As another example, if your deductible is $1,000 and you suffer $800 in damages, then your insurance company isn’t going to 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, say, $1,200?

In this case, your damages are only $200 more than your deductible. Therefore, you’ll receive only $200 from the company. Is this worth it?

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. You may find, once you know the exact situation for your personal circumstances, that it’s less costly for you to pay the additional $200 out-of-pocket and keep the claim off your policy.

Did Someone Get Hurt?

Many incidents involve only property damage. For example, maybe the wind blows some shingles off of your roof. Or perhaps you back into a pole in a parking lot. When your loss involves property damage only, it sometimes makes sense to take care of it yourself and avoid the impact that comes with 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. No matter how minor the injury may be, the injured party can come back and sue you at a later date. If this 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.

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 claims that involve bodily injury.

Local Laws

Local insurance laws protect you, the consumer. Among other topics, these 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 a lot of protection or very little. For example, personal auto insurance is generally well-protected under the law. An insurance company can’t cancel or non-renew a policy simply because they don’t want to insure you any longer. The law states the conditions under which cancellation is allowed.

However, other lines of insurance–like business insurance, for example–have fewer such defined cancellation criteria. In many cases, the insurance company can non-renew your policy just because they don’t want to keep your risk on their books.

Local laws, company rules and practices, the size of your loss, your deductible and your personal claims history and experience all mix together to create your unique circumstances. If you’re wondering whether or not it makes any sense to submit your claim, give us a call. Get the facts for your specific situation, and then make an informed decision.