Should You File a Claim?
Purchasing insurance can protect your property from being lost, damaged or stolen. The most common types of insurances include auto or home insurance. However, if some form of accident occurs, should you file a claim? More importantly, will your insurance rates increase if you do?
Filing Too Many Claims
No matter how severe the accident or who is responsible for the accident, the number of insurance claims you file will have a direct impact on your insurance rates. The rule of thumb is the more claims you file, the more likely your insurance rates will increase. Additionally, if you file too many claims, your insurance courier may actually drop you. Furthermore, if you are at fault for an accident and a claim is filed, your rates will most likely go up.
On the contrary, if you are not at fault for the accident, your rates are likely to remain the same. For example, if your car is hit while you are parked or someone hits you from behind, then the accident is clearly not your fault. However, if you have too many claims that are not your fault, your rates may still go up. Even when it comes to your home insurance, if you file too many claims your rates are likely to go up. This includes claims for natural disasters such as floods, hurricanes, and earthquakes.
Red Flags to Avoid
Some claims raise red flags to insurance companies; if possible, try to avoid them. Slip-and-falls and other personal injury claims, water damage, and even mold raise red flags. These types of claims generally cost insurance rates to go up.
In addition to filing claims, there are some other red flags that can cause your auto insurance rates to go up. For example, speeding tickets and other moving violations can cause your rates to increase. Additionally, having bad credit can cause your insurance rates to go up. While your credit ratings seemingly have nothing to do with your insurance, it is a factor that is considered.
What You Can Expect
Depending on the claim you file, rate hikes can range from 10-40% or more. Often, these rates will be in effect for years to come depending on the insurance provider. A rule of thumb is that the rate increase will span from 2-5 years. While this may seem stiff, it is even worse if your insurer drops you all together. You will likely pay extraordinarily high premiums and may have to purchase high-risk insurance.
While there are no rules set in stone pertaining to rate hikes, generally you should avoid filing frivolous claims. This will reduce the likelihood of your rates increasing. Another option you can consider is increasing your deductible to $500-$1,000. This way, most small claims will be handled out-of-pocket.
Final Notes
Even when it comes to legitimate claims, some insurance companies may increase your premiums for any incident, while another will not. However, when it comes to filing too many claims or questionable claims, you drastically increase your chances of experiencing a rate hike or worse, being dropped altogether. What’s worse is even if you’ve paid your insurance premiums on time for many years with no incidents, you can still be dropped or experience a rate hike if you file for a single claim.
Finally, do your homework on your insurer’s policies and industry practices. This can really help you to avoid surprise rate hikes in the future.
