What will happen to my coverage and rates if I have a claim?

So, you had a claim…

“What’s going to happen to my coverage and my rates in the future?”

It’s a question we receive almost daily at our agency. As with most things insurance-related, the answer is never simple.

Auto Claims

When it comes to auto claims and their impact on your policy, the first thing that will determine how you will be impacted is the fault of the accident. Did you cause the accident or did someone else? Was it an act of God or nature? Let’s break these down and see how they affect your policy…

1) At-Fault Accident

Let’s start with the big one – the at-fault accident.

As the name implies, this is an accident in which you were the main cause of the incident. It could be that you rear-ended someone in stop-and-go traffic or that you collided with an obstacle that could have been easily avoided. At-fault accidents are paid under the collision provisions of your policy and will have a very negative impact from both an eligibility standpoint and price point. Generally, you can count on an increase of 20% - 50% from an at-fault accident. This can vary widely depending on the company and certain factors.

Was it your first accident? Claims are typically cumulative – each one will be more painful than the next.

Was the driver under 25 or elderly? This will exaggerate the affects as well.

Did you receive a citation to go along with it? In most cases, insurance companies see this as a single event, but watch out – there are companies out there who will hit you for both.

How much damage? Most companies will have a threshold of around $1,000. If you’re lucky enough to stay under this amount, it could be that your company will not count it against you.

Was anyone hurt? If your accident caused injury or death to another person, in many cases, the impact of your claim on your policy will be higher.

Will your company drop you? It depends on the severity and how many accidents you’ve had but, generally, if you’ve had more than 2 at-faults in a 3 to 5 year window, your insurance company is going to write you a goodbye letter.

Should you pay it out-of-pocket? When in doubt, yes! Remember, insurance policies are really designed to be catastrophic. They are there to keep you from going into debt or otherwise ruining your finances. If the claim is small enough to handle out-of-pocket (and/or your company doesn’t have a chargeable threshold), it is always best to keep your powder dry. Trouble sometimes comes in twos or threes. It would be a shame to have a major rate increase or get non-renewed because you filed that little claim when you really didn’t have to.

2) Not-At-Fault Accident

So what happens if you have a collision claim that is not your fault? In a sane world, a not-at-fault accident would not impact your auto rates or eligibility at all. Unfortunately, even a not-at-fault accident will probably impact your policy in one way or another. Some companies will hit you with a surcharge for this type of accident, while others may not. Some only count these accidents during the new business process, while others will apply a surcharge to an existing customer.

I know it seems illogical to charge for something that is not your fault, but insurance companies view these types of claims as an insight into your driving habits and frequency. Even a skilled driver who puts on a lot of miles or has a treacherous commute will, sooner or later, end up with this type of activity. And there are some drivers (you know who you are) who just seem to have a black cloud following them around…

3) Acts of God or Nature

Outside of at-fault and not-at-fault collision claims, there are claims referred to as comprehensive claims (also known as other than collision claims). These types of claims are usually what we refer to as an act of God or Nature – a hail storm or a collision with a deer. These are claims in which the insurance company really can’t blame it on anyone. For this reason, the insurance company is typically merciful. Most companies don’t charge at all. Others might apply a small surcharge if it is a larger claim. I’ve never seen it happen before but, theoretically, you could have your policy non-renewed if you accumulate a lot of these in a short period of time.

Chipped or cracked windshield and roadside assistance claims also fall under this category. In most cases, these types of claims don’t impact pricing directly. You’d also need to have a pretty long streak of bad luck for the insurance company to drop you because of them.

What about “accident forgiveness”? I’ve already touched on this subject in a previous article. You can read more about accident forgiveness here.

Homeowners Claims

What about claims on your homeowners policy? Unlike an auto policy, home policies really don’t discriminate between “at-fault” and “not-at-fault”. While it is true that some companies give you a break if the claim is considered “catastrophic” (usually a widely known weather event), most claims are treated the same. With the home policy it typically doesn’t matter the amount of the claim either. A $100 claim is going to impact you the same as a $100,000 claim. A claim surcharge is usually in the area of 10-25%.

At the same time, homeowner’s policies can be quite unforgiving when it comes to claims frequency. Have two claims in a short period of time and you run the risk of being non-renewed. Have 3 or more and you will be asked to take your business elsewhere. For this reason, it is very important to stay away from filing smaller claims. They can easily come back to bite you.

If you’re trying to decide whether you should file a claim or not, talk to your agent. Odds are, he or she has the experience to tell you if your claim is worth it or not.

Interested in talking with an agent about claims and how they might affect your insurance rates?

About the Author:

Robert Heed is a licensed insurance agent located in Medina, Ohio. Robert has been in the insurance business since 1994. He shares his practice, Agency One Insurance, with his wife and fellow insurance agent, Christine Heed. Robert focuses on Personal lines, while Christine’s focus is with Commercial Insurance. They have two children, Patrick and Grace, and have been married since 1995.