You did the smart thing and bought insurance to make sure your business is covered in case of a loss. Something happens. Someone broke in and stole some merchandise. A pipe bursts and floods the storage room. A fire erupts in the boiler room, causing damage. You have the option of making an insurance claim. Should you?
When is Filing a Claim a Good Idea
The business insurance you pay for is there to protect you against covered losses. If you have insurance, you should use it when it makes financial sense. But, what times does it make sense?
- You have a major loss that stops or interferes with business operations. A tornado or fire damages your building and you need to relocate temporarily. A pipe bursts and you have to make extensive repairs. Someone breaks in and steals most of your high-value inventory. These are situations where filing a claim makes financial sense.
- Personal injury and liability claims should always be filed. What may start out as a simple issue can quickly turn into a major legal concern. Your insurance company can help you manage personal injury and liability claims. They can offer settlements and avoid legal complications. This is a situation where the power of the insurance company can be your best asset.
- You don’t have the ready funds to make the business whole again. There are times when you just don’t have the funds to make repairs or replace damaged equipment. And you need that done before you can get the business back to full functionality. Even for a relatively small amount, you may have to make a claim to keep your business afloat.
When is Filing a Claim a Bad Idea
The downside to making insurance claims is the potential risk of higher premiums in the future. If a business makes multiple claims in a short period, especially for small amounts, insurance companies are inclined to assign a higher risk to the business and hike insurance claims as a result. In extreme cases, the insurer may drop the business as a client. This not only deprives the company of that insurer’s coverage, it can also make it very difficult to find another insurance company who will give coverage.
Minimizing the number of claims your business makes is good practice. Here are a few situations where filing an insurance claim is not a good idea.
- The repair or replacement costs will be close to the deductible. If your deductible is $1000, and the claim value is $1200, you should not file a claim. You will only get $200 covered, after the deductible and it will still count against you as a claim, which can push your premiums up.
- The amount of the claim is minor. Even if your deductible is low, you need to weigh the amount of the claim against the potential cost of raised premiums. If the amount you would recover by filing a claim is less than $1000, it is better to just eat the cost and not make a claim. Even if it would be more than $1000, consider making the repairs yourself if it is possible.
- You have filed two or more claims in the past decade. Filing insurance claims on a regular basis is a sure trigger for a premium raise. As a rule of thumb, underwriters don’t like to see more than one claim every decade or so, especially for the same kind of event. Of course, there may be times when you cannot avoid making claims, but if possible try not to.
- The claim is related to a maintenance matter. If the damage done was related directly to a maintenance item that you did not address, don’t make the claim. Insurance companies usually don’t pay for these claims. They will also identify your business as a higher risk and hike your premiums.
- The claim is related to a non-covered event. You need to know what events are covered by your policy and which ones are not. If an event is not covered by your insurance policy, don’t make a claim. The insurer will only deny it. But, they will still count it against your claim count.
Insurance is there to protect your business. But, it is a protection you should use only when absolutely necessary. Making multiple or unnecessary claims can drive up your premiums and even make it hard to get coverage. Being smart with your insurance coverage will ensure you are covered in a disaster, without driving up your day-to-day costs.
Filing and negotiating a claim can be tricky and stressful. The experts at Commercial Claim Pro can help you maximize your settlement. Contact them today at (877) 877-6612. And be sure to download our eBook for more tips on handling your commercial insurance claims.
Photo Erich Ferdinand | Used under Creative Commons image attribution license 2.0