Insurance can be an incredible safety net in the event of disaster or other unforeseen circumstances. It can help cover most unexpected costs and provide financial relief whenever the unthinkable happens. However, it’s not a free service, so it’s important to consider how different situations can affect your premium over time. For example, while filing a claim can be essential in times of need, filing multiple claims in a short period of time can have lasting negative effects on your insurance premiums. Today we’re here to help you understand how filing multiple claims affects your premium, so that you can make more informed decisions about when and how to use your coverage.
What Is the Relationship Between Claims and Premiums?
One of the big things that insurance companies take into consideration when establishing what your premium is going to be is their assessment of your risk. Any time you file an insurance claim, it is essentially like raising a red flag to your insurer, letting them know that a risk has materialized. If you only make a claim or two over the course of several years, your risk is quite low and doesn’t pose a very significant concern to your insurer. However, if you make frequent claims in a shorter period of time, it suggests a pattern that will likely cause your insurer to adjust your premium accordingly.
How Multiple Claims Can Affect Your Premium
- Premium Increases
- This is the most direct consequence you’ll face by making frequent claims. The more claims you submit, the more likely you are to file even more in the future, which increases your risk and, in turn, your premium. The increase in your premium is meant to compensate for the additional costs that your claims have imposed on the company.
- Loss of Discounts
- The longer you go without making a claim, the more likely you are to earn a discount from your provider. A lot of insurance companies offer discounts for lengthy claim-free periods, but if you file multiple claims you can lose your eligibility for these discounts, which compounds the increase to your premium to even further raise your insurance costs.
- Policy Cancellation or Non-Renewal
- Did you know that your insurance provider actually retains the right to cancel your policy or simply refuse to renew it if they determine that you’ve become too high-risk as a client? As if that’s not bad enough on its own, it can also be difficult or expensive to find new coverage with a policy cancellation on your record.
- Higher Deductibles for Future Claims
- Alternatively, some insurers might choose to raise the price of your deductible rather than – or perhaps in addition to – raising your premium. This is another way that companies can mitigate risk, as it puts more of the claim costs on you.
When Should You File a Claim?
Naturally, you want to do everything you can to reduce the number of claims you make. There will certainly be times when filing a claim is your best or maybe even only option, but we do have one trick that you should consider that might help. If possible, get your own quote before involving your insurance company, then compare the cost of the repairs to the cost of your deductible. If the repairs aren’t going to be that much more than your deductible would be, consider just paying out of pocket rather than risking the aforementioned ramifications.
We hope that all of this information has helped you better understand how filing multiple claims can ultimately affect your premium in the long run. If you have any questions, or for personalized insurance advice and coverage options, contact us here at Glover Family Independent Insurance today!