Are you nervous about filing an insurance claim, for fear that your rates will go up? You are not alone! This is one of the most popular questions in the insurance industry. Unfortunately the answer is not black and white. No two claims in the world of insurance are the same. Each claim is evaluated for its unique situation. Each policy and company is also unique. Not to mention, there are other factors that may come into play, for example: If you have been with a company long enough to earn a claims free discount, you may not see an increase resulting from a claim.
That being said, we USUALLY see an increase in insurance premiums after a chargeable loss. For auto insurance this typically means that you are the at fault party. For home insurance, the majority of losses will be considered chargeable.
Now the important question that you are all wondering is WHY?
Why do you pay insurance, just to have the rates increase when you need to use it?
Again, there are many factors that go into determining your rates, but we will attempt to provide you with some insight. Let’s start with the basics. Insurance is a transfer of risk. You pay insurance premiums to your insurance company and they take on the risk of you turning in a claim. (If you do not want the insurance company to take on your risk, please see the link below.) To determine how much you should pay for insurance, insurance companies look at specific factors to determine how much of a risk they are taking on. Now when one of these factors changes, say you have an accident, the level of risk goes up and therefore, so does the premium.
Here is another way to think about it… Say Bob rents out his home to Sue. If Sue has pets, Bob may want to charge Sue a higher rent, because pets have an increased risk of causing damage/mess. Or maybe Sue has been a long term tenant and Sue now decides to get a pet or two. Bob would then consider charging a pet deposit or a monthly pet fee. In this situation a factor in the tenant profile changed, posing a greater risk and therefore a higher rate.
Here is another example… Maybe someone asks to borrow your car. If you agree, you are taking on the risk of their driving. If the personal that asks to borrow your car has had several accidents and or tickets, you may reconsider allowing them to borrow your car (they are a high risk).
If you do not want insurance and you would like to carry the risk of a claim yourself, most states offer other options. Here is a link with additional information and details that you may find helpful. http://www.dmv.org/insurance/alternatives-to-auto-insurance.php
In summary, we typically see rate increases when claims are filed. At Strand Insurance, we do not set the company’s rates or rules, as we are independent insurance agents, but we do want our clients to be happy and comfortable. Part of this includes being informed, so we encourage you to discuss your insurance questions and concerns with your agent or one of ours.
Strand Insurance is licensed in WA, OR, CA, and AZ.