You purchase insurance to protect your finances in case of an accident or injury. If you crash your car or if your house catches fire, insurance allows you to repair the damage without reaching into your pocket (as much). But you are smart if you are wondering how filing a claim will affect your insurance rates.
There are actually situations in which it is best to cover damage out of pocket rather than filing a claim with your insurance. This might seem counterintuitive, but it can save you a bunch of money in the long run because, after filing a claim, your insurance rates are likely to increase.
Before filing a claim, you need to ask yourself if you are prepared to pay more money on your insurance rates and whether you can cover the damage out of pocket.
Sometimes, filing a claim will affect your insurance rates in a big way, while in other cases you won’t notice any change at all. This is because insurance companies set their rates according to the level of risk each customer presents.
A major auto accident, for example, suggests that the driver is prone to reckless behavior behind the wheel, particularly if he or she receives a citation and is determined to be at fault. On the other hand, if you’ve been with the same insurance company for 10 years without a single claim and you get into a fender-bender, you might see no change in your premiums.
Some insurance companies offer forgiveness programs for certain types of claims. In this case, filing a claim won’t affect your insurance rates as much, so you can feel comfortable with it. Unfortunately, there is no magic formula to help you decide.
Why Fault Doesn’t Matter
Many people operate under the erroneous assumption that if they aren’t at fault, filing a claim won’t affect their insurance rates. This is not the case. Filing a claim means that you present a higher risk to the insurer, and they may decide to increase your premiums.
Termite damage to your home, for example, is not your fault. Perhaps you should have requested an inspection sooner, but you didn’t invite the termites over or give them permission to invade your walls. However, this tells the insurance company that your property is at risk for damage now and in the future, so filing a claim to fix the damage might result in an insurance rate hike.
The same goes for a car accident in which you are not at fault. The fact that the accident occurred at all costs your insurer money, so filing a claim might affect your insurance rates.
Changes to Expect
Filing a claim can affect your insurance rates by as much as 20 to 40 percent. This is a significant increase to your premium and should not be taken lightly.
Be aware that insurance companies will drop customers if they file too many claims or if their claims are particularly expensive. This can affect your life much more drastically, so avoid filing multiple claims close together, if possible.