In some cases, filing a claim for damage just isn’t worth it. In addition to getting socked with higher premiums, you could find it harder to get coverage later.
When should you make an insurance claim?
For many, the answer is: “Whenever I have an accident or suffer damage to my house or car.” however, the decision is rarely so simple as in some cases, filing a claim may result in an insurance company raising your rates.
In other instances, the decision to file a claim could put your name into a database that makes it difficult to get or maintain coverage in the future.
Insurance is there to give you peace of mind and to restore damaged property to its original state, that is to make good on a loss or to make individuals whole again.
However, before you make a claim, you should know how it could come back to haunt you.
Database danger
Many people fear that filing insurance claims will cause them to be “blackballed” by insurance companies, resulting in higher premiums, loss of coverage and difficulties obtaining new insurance.
Unfortunately, in some cases they might be right.
The vast majority of consumer insurance claims are recorded in one or both of two databases: CLUE and A-PLUS. The larger and better-known database — CLUE, which stands for the Claim Loss Underwriting Exchange — is operated by ChoicePoint in Georgia. A-PLUS, or the Automated Property Loss Underwriting System, is run by Insurance Services Offices in New Jersey.
CLUE is so well-known that people in the insurance industry often refer to reports generated by either database as “CLUE reports.”
More than 98% of insurers writing automobile and homeowners coverage provide loss data to the CLUE databases.
CLUE reports include policy information such as name, address and policy number, and claim information such as date of loss, type of loss and amounts paid.
Homeowner and auto claims are registered in CLUE and A-PLUS. Health insurance and other types of insurance are not.
ChoicePoint does not determine how the information in its database is used. That is up to individual insurance companies.
However, insurers may use these databases — which originally were created to prevent insurance fraud — to research and screen applicants’ claim histories. In some cases, this could result in higher rates or difficulty obtaining coverage.
Information found in these databases may be more expansive than many people realize. For example, the Insurance Information Institute warns on its Web site that an insurance carrier may submit information to CLUE when a customer simply calls on an inquiry.
However, ChoicePoint frowns upon that practice.
A claim is loaded into the database when the loss occurs and is accessible when a CLUE report is requested by the carrier at the time of application for insurance. For several years Choicepoint has cautioned insurance carriers not to enter inquiries into the CLUE database — only actual claims.
Some states have taken steps to restrict the type of information that may be found in these databases. About one-third of states have passed legislation regulating how these databases can be used, according to the Insurance Information Institute’s Web site.
According to Choicepoint, all 50 states require insurance companies to file their rating criteria and premium structure with regulators.
This means any decision made by a carrier must comply with the information filed with — and in some cases approved by — state insurance regulators.
Data is kept in CLUE and A-PLUS for five years, although states can pass legislation that requires information to be kept for longer, so long as these laws comply with restrictions established by the federal Fair and Accurate Credit Transactions Act. For example, in California, data on care insurance claims are held for seven years.
When to think twice
So, when should you file a claim?
The insurance companies provide no general guidelines, and rather these decisions are made on an individual basis on claims made by any insurance carrier’s customers.
Filing a single claim for homeowners insurance generally will not result in higher rates. However, making two claims in a three-year period is more likely to trigger an increase, although each company is different. Many companies base their decisions on how long someone has been a customer and the nature of the claims.
Also, most insurers say homeowner claims related to the weather or other catastrophes do not typically result in higher rates.
So, which claims do pose a potential risk to your insurance rates or coverage?
Dog bites
Dog bites are the largest single cause of home-policy claims, according to Robert P. Hartwig, the president and chief economist of the Insurance Information Institute.
Many insurance companies keep a list of dog breeds most likely to attack, based on Centers for Disease Control and Prevention statistics. If a homeowner owns one of those breeds, it may be difficult to obtain insurance.
A single attack is likely to result in higher premiums. However, homeowners may be able to keep their rates from escalating by remedying the situation to the insurance company’s satisfaction.
This may involve getting rid of the dog or taking the dog to an animal trainer. Sometimes, the homeowners’ rates would then depend upon passing a probationary period, such as going six months without another attack.
Water damage
Water damage tends to set off a barrage of red flags for insurers, largely because of the costs of eliminating mold. The biggest controversy over CLUE reports has been over water damage and its effect on real-estate sales.
Home buyers cannot obtain CLUE reports on homes they are considering purchasing. However, a home buyer’s insurance company can obtain the report in deciding whether to insure a home.
If the insurance company finds a history of mold or water damage, the new buyer may have problems getting home insurance.
Be careful with a water claim, as while Insurance companies aren’t as paranoid as they used to be a few years ago, many have begun to exclude mold coverage from their policies.
Plumbing problems that cause damage inside a property also can be red flags to insurance companies, particularly if the repairs — or lack thereof — result in an additional, similar claim.
You might be better off solving water-damage issues yourself, especially if the damage is minor and involves broken pipes or leaks in window wells, walls or seams.
Some home sellers may actually use CLUE reports to their advantage.
Home sellers can use their CLUE report as a marketing tool to demonstrate to potential buyers that their home has not had a loss claim or, if it has, to show that repairs were done properly. Home buyers can make the purchase contingent upon the seller providing a copy of the CLUE report.
Slip-and-fall claims
A slip-and-fall injury is a generic term used to describe an injury that happens when someone trips, slips or falls as a result of a hazardous or dangerous condition on someone’s property.
Slip-and-fall injuries, according to the National Safety Council, are the largest cause of emergency-room visits. If someone hurts himself or herself on your property and files a claim, your rates may rise.
Rates on 30-year mortgages
Comments (0)