Hailstones have given your car’s exterior the complexion of a golf ball and a tree
branch decided today was the perfect time for a new skylight in your living room.
What happens now?
Should you, like thousands of others across the U.S., file insurance claims for
damage, or fearing cancellation of your policy, will you pay for repairs yourself?
First, be cautious and thoughtful of all claims you submit, and know the facts.
At least 95 percent of insurers now use credit scores, credit history, as well as,
how many and what type of claims you file, to determine what you’ll pay in future
premiums. In addition, an increasing number of companies are using this information
to determine risk levels and whether to renew policies.
Over the past two years, studies have shown about 42 percent of American households
have experienced a homeowner’s rate increase. The average cost is expected to increase
by 9 percent this year, after a nearly 8 percent increase last year. Meanwhile,
nearly 2 percent of households have lost their coverage altogether, due to non-renewal.
According to the designers of the FICO scoring system, while there is not direct
connection between poor credit and driving record, there is believed to be a strong
link between bad credit and increases in the number and likelihood of claims filed,
for both homeowner’s and auto policies. Many critics, however, question the validity
of these beliefs and the inconsistent emphasis the insurance industry places on
this information. One insurer may use the credit record to set rates or premiums,
another may utilize it to determine coverage eligibility while yet a third may require
specific deductible amounts on policies, after considering the information.
Several states—including Arkansas, Indiana, Kansas, Nebraska, North Dakota, Oklahoma,
and Virginia have passed laws that offer guidelines for how credit can be used.
At least 10 other states are considering bills.
So what can you do now and in the future?
Talk to your agent. Find out your company’s policies. Check what improvements
or upgrades you can make to your property for premium discounts. Raise your deductible—this
tends to lower the number of claims made and could lower your premium 10 to 30 percent.
Group all your policies with one company for additional considerations and discounts.
(Always check with the Better Business Bureau before you switch to a new company.)
Talk to the department of insurance in your state. Get information on what guidelines
exist, if any.
Get help for credit or debt issues now, rather than later. Form good habits today,
so that in times of crises a special effort to pay your bills consistently is easier
to maintain.
And always, think before you file claims.
If you have filed more than 3 claims in the past 3 to 5 years, your insurer might
consider you high risk and raise premiums, restrict coverage or choose not to renew
your policy.
If the amount of your claim does not exceed your deductible, do not file a claim
and pay for the necessary repairs yourself.
However, if this is your first claim in awhile and it will exceed the deductible,
turn it in to your insurer.
In the end, you’ve paid for the insurance, and that’s what it’s there for after
all.