Should You Use Your Insurance Coverage for Every Loss?

Jul 15, 2020

By Lisa Brown, Managing Director, Altus Private Risk

After experiencing a major loss, a payout on your home or automobile insurance can be a saving grace. You can restore your home or make repairs without major out-of-pocket expenses. After all, that’s what insurance is for.

But depending on the situation and circumstances of your loss, it’s not always advisable to file a claim. In some cases, filing a claim might actually be more expensive in the long term than paying expenses out of pocket.

Unlike your health insurance, which you’re encouraged to use as much as possible, property and casualty insurance isn’t designed to be used for every expense. While your insurance carrier may approve and cover a claim, it is likely to increase your premium costs at your next renewal.

Your insurance provider keeps track of every loss you report. When there are more losses on your report, your insurance provider may see you as high-risk and might choose to increase your premiums or, in extreme cases, deny you coverage altogether. Depending on the size of your loss, your premium increase could actually be more expensive in the long-run than paying for repairs without going through your insurance policy.

High activity on your insurance report can also be a red flag if you’re looking to switch carriers. Because losses stay on your insurance report for 3-5 years, you could be looking at higher costs and a smaller pool of carriers willing to write you a policy for years after the incident occurs.

Weighing Repair Costs vs. Deductibles

Some bigger losses, such as an overflowing toilet that has been leaking all night and will almost certainly result in serious damage, should be reported as soon as possible. On the other hand, smaller losses, like one gutter blowing off your home that will likely cost less than your deductible to repair, should be handled without alerting the insurance carrier, especially if your deductible is high.

All of this is not to say that you should never use your insurance policy. Instead, you should always consider the long-term impact of reporting small or day-to-day losses and not treat your insurance policy as a maintenance fund.

Any time you suffer a loss, the first thing you should do is contact your broker. We will help you examine your policy to see what is covered, what expenses may not be included and how reporting the loss may impact your policy and deductible. By walking through different scenarios with you, we can prevent you from paying more in the long run.