I’ve had the following conversation with several clients over the years. It goes a little something like this:
Client- “I want to submit a claim.”
Me- “Mr. Jones, you’ve already submitted 2 claims in the past year. You have a $500 deductible and your repair estimate is for $550. You may want to reconsider turning this in and paying for it out of pocket.”
Client- “But that’s what insurance is for! That’s why I pay premiums. So the company can pay my claims. All of them.”
Ah, indeed. And that’s the same exact attitude that will get your policy cancelled by the insurance companies.
Trust me- submitting too many insurance claims will result in negative action
Insurance companies call this frequency and when your frequency is high, they call you on it. If you’re lucky, they may only require you to raise your deductible. If you’re not- the cancellation notice will come next.
It’s time we move away from this line of thinking
Insurance was invented to help you get back on your feet when a disaster occurred that wiped out everything. Most people can handle paying for small stuff (a window, a door, a small scratch on the bumper). It’s the 80 mile per hour tornado they can’t handle. Or the hurricane. Or the earthquake. Or the fire.
Insurance is NOT meant to pay for the small stuff. The days of submitting a claim for $275 when your deductible is $250- HISTORY. The insurance industry calls these types of claims “nuisance claims.”
If you’re my client, I’ll strongly discourage you from turning in the small insurance claims
Granted, the final decision is up to you. But I’ll do my best to convince you otherwise. Why? Because when the cancellation notice or deductible increase letter arrives, I’ll be the one to get yelled at. And although it’s not my fault, I would prefer to not receive that call. I also don’t want you to go through the aggravation of the cancellation process. Trust me, it’s a bad deal all around.
It’s time we all take responsibility
I’m not saying you should NEVER turn in a claim. What I AM saying that you need to be able to make an educated decision about when it makes sense to submit a claim and when it doesn’t. Here’s some examples:
- The high winds come and tear off a few pieces of your siding. Your deductible is $250. The cost of the siding is $300. Pay for this out of pocket and save the claim for when the wind tears off half of the siding on your house. Then you’re probably looking at several thousand dollars and not $50. And most people don’t have thousands of dollars just laying around on the off chance the wind decides to rip apart your house.
- A tree falls, but luckily, just nicks the edge of your porch. The repair estimate is $600. Your deductible is $500. Think long and hard before you submit the claim. I’ll recommend you pay for it out of pocket (yes, even with the $100 difference). When the tree falls and demolishes your porch, you’ll be happy you “saved” the claim for another time.
- You’re backing out of a parking space and manage to nick your bumper. Estimate to fix? $700. Deductible? $500. Yes, maybe even at $200 you want to consider paying out of pocket.
I don’t know where each person’s “pain” point is- rather the point where they simply can’t foot the bill themselves. Nor do I want you to forgo groceries for the week or not pay your rent.
I just want you to have the knowledge to make good decisions when you have a claim. I want you to be aware of the consequences of submitting too many claims in too short a time period. And especially the dangers of submitting too many small claims.
Am I out of line? Am I living in a fantasy world? Anything you want to add? Ever have an experience similar to what I’m describing?