To our valued clients,
You are likely reading this because you recently had an auto accident, or have experienced some other kind of loss to your home, your business, or one of your vehicles.
You may be wondering …
These are all very important questions, and actually quite commonly asked. While each situation is different, here is some relevant information to help you answer your questions. However, you won’t get an answer specific to your situation.
Why not? There are two main reasons:
The thing to note is, if you are concerned about the potential consequences of submitting your claim, please contact us to discuss your particular situation. That is why we are here and is one of the benefits of choosing Prime Insurance for your personal insurance needs.
We will counsel you to explain how your insurance coverage works and we will help you understand the facts and potential impacts BEFORE you submit your claim, so you can make the right decision for you.
You may wonder..
Yes, insurance is meant for paying claims, based on the protection options and limits you selected, and the premiums you pay. You claim, they pay. That’s the deal.
Then why worry about the potential consequences of making claims? Why can claims increase my premiums, or even cause my policy to be canceled? That’s why I have insurance!
Well, that is absolutely true. But there is more to the equation.
Insurance, and the premium you pay for it, is based on perceived risk – the risk of a loss occurring and a claim being paid. A high risk of loss means that higher prices are needed to pay for those increased claims. And a low risk of loss means that lower prices are possible.
So, how is the level of risk determined? There are many factors, but claims experience is one of the most significant.
Statistically, people who have made a claim are more likely to have another future claim. So, compared to someone who has no previous claims, a person who has claims on their insurance track record presents a higher risk of loss to the insurance company, and higher prices.
Therefore, when you make a claim, you then represent higher risk of subsequent loss to your insurance company in the future. And sometimes that increase in risk will be offset with an increase in premium prices.
This enables the insurance company to maintain lower prices for people who represent a lower risk.
This question about whether to submit your claim is really only relevant to small losses which are close to your deductible amount.
Obviously, if you an accident that causes $10,000 in damage to your car, or a water leak that causes $20,000 in damage to your home, you likely won’t even consider not submitting your claim. That is why you have insurance!
However, a small loss can sometimes cost you more by submitting it, than paying for the loss yourself will cost. The deductible, plus the consequences of submitting the claim may add to more than the payout you receive for your claim. In that case, it makes better financial sense to pay for the loss yourself, rather than submitting a claim.
Your deductible amount has a big influence on whether or not you should submit your claim.
Your deductible is the amount you pay yourself toward the amount of your current loss. And the insurance company pays the balance of the total loss.
For example, if you suffer $5,000 of damage to your home, and your deductible is $1,000. In that case, you would pay $1,000, and your insurance company would pay the remaining $4,000. That makes sense.
However, if the amount of your loss is lower than your deductible, there would be no point in submitting a claim. You will pay for the whole amount anyway, so there is no benefit to reporting it.
For example, if your deductible is $800 and your suffer $500 in damages, then your insurance company won’t pay anything because the cost of the damage is lower than your deductible.
But here is where the decision becomes more difficult.
What if your loss is only a small amount more than your deductible? What if your deductible is $800 and the damage is $1,100?
In that case, your damages cost only $300 more than your deductible amount, so you will only receive $300 from the insurance company. The question is, is the $300 worth triggering the potential consequences of submitting the claim?
The answer is, it depends on what the consequences will be!
If the claim will cause an increase in your rates, particularly a significant increase, or it may cause your policy to not be renewed, then it will be less costly to pay the extra $300 for your loss, and avoid the claim against your policy.
This is why it is important to know the consequences for your particular situation before you make a decision.
Many incidents result only in property damage, but nobody has been injured.
In such cases, it often makes sense to take care the loss yourself and avoid the consequences of submitting a claim, as outlined above.
However, in a case where someone has been injured, you should ALWAYS submit the claim. Why? Because no matter how minor the injury may seem, or how much the injured party may insist that they are fine, they can still come back and sue you months, or even years later.
If that happens, but you did not report the claim when the incident occurred, your insurance company can legally refuse to defend you in the lawsuit and refuse to make any payment of claim.
Your policy requires that you report claims promptly, so the insurance company can control the claim. If you do not, they can legally deny coverage.
In the case of a minor property loss, there is no risk of someone coming back to sue you later. But when someone has been injured, you can never be sure. Defending yourself in court is costly, even if you eventually win, so it is not worth the risk. When someone has been injured, ALWAYS report the claim.
Every insurance company has their own rate plans, rules, and practices. And they all handle claims differently.
Some companies set a price for just about everybody, so even if your claims record gets worse, they will still insure you. Your premium will go up as your claims experience increases, but you will still be insurable.
Other companies don’t offer a price for everyone, and if your claims record becomes too bad, they will decide to non-renew your policy (within what is allowed by law). If that happens, you will have to seek insurance elsewhere, and a new company will likely charge a much higher price.
Provincial insurance laws are designed to protect the consumer. Among other areas, these laws set out the circumstances under which an insurance company can cancel or non-renew a policy. These laws can provide you with significant protection, or very little, depending on the type of insurance concerned.
For example, personal auto insurance is particularly well-protected by law. An insurance company cannot cancel or non-renew a policy just because they don’t want to insure you anymore. The law outlines the conditions under which cancellation is permitted.
However, other types of insurance, such as business insurance, have fewer defined cancellation criteria. In some cases, the insurance company can choose to non-renew your policy just because they no longer want your risk on their books.
The end result is, that all of the above factors contribute to the decision of whether to submit a claim, or not.
If you are unsure whether it makes sense to submit your particular claim, call the Prime Insurance team FIRST, to find out the facts particular to your specific situation. Then you will be able to make an informed decision.
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