5 Times When You Shouldn't File That Insurance Claim

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insurance claimThis holiday season, AAA estimates that about 84 million people, or more than a quarter of the country's population, will take car trips of at least 50 miles. The Consumer Federation of America forecasts that there will be more than 325,000 auto accidents during that period, leading to more than 200,000 claims filed with insurance companies.

And that's just for our vehicles. Every day, people have claims they can file with their home insurers, too. Guess what, though: Sometimes you should definitely not file that claim.

Insurance companies pay attention to customers who file a lot of claims. Every time you ask them to foot the tab, they take note. And at some point you become an unprofitable customer, driving them to raise your rates -- or cancel or refuse to renew your policy.

A better approach to insurance is to think of your policy as being there to protect you from big losses, not for taking care of every little mishap that occurs. With that in mind, here are five situations where it may be less costly in the long run if you simply skip filing a claim and pay for the losses out of your own pocket.

1. You have some moving violations on your record already.
Auto insurers quote you rates based on the kind of driver you seem to be. Some insurers raise your rates based on the size or number of claims you've filed, while others will also take into account the tickets you've received. So, if you have some moving violations on your record already, you might not want to chance filing a claim if you can avoid it, because that might lead your insurer to hike your rates.

2. The claim pays out little more than your deductible.
Another consideration is your deductible. If your policy has a $500 deductible, you might not want to bother filing a $600 claim, as it will only net you $100, and the claim could count against you one day in the eyes of your insurer -- especially if you end up having to file one or more within a few years. If your expense is less than the deductible, then you almost certainly will want to not file the claim, in order to keep your record as clean as possible.

Note, too, that you might want to consider raising your deductible to a higher level. A move from $250 to $500 or from $500 to $1,000 could significantly lower your annual premiums and over time could more than pay for itself.

3. The claim involves water damage.
If you're thinking of filing a claim on your homeowner policy due to water or mold, think twice. Since such problems can be so complicated, costly and sometimes persistent, insurers hate to see them. Some insurers refuse to cover mold, or make you tack on a rider to your policy to do so.


A single small moisture-related claim can cause you huge headaches. Not only might it lead your insurer to drop you, but there will likely be a record of your claim in a central database accessed by most insurers, meaning that many or all other insurers might refuse to cover you, too. On top of that, the problem could even lead to difficulties selling your home, if would-be buyers find that they can't get insurance for it.

4. You could have prevented the damage.
Before filing a homeowner claim to cover damage, ask yourself whether you contributed to the damage by failing to address an existing problem. If so, your insurance company will very likely point that out and refuse to pay. Negligence is not reimbursable.

For example, if you sustain water damage in your attic due to a roof that should have been replaced years ago, that's a problem you could have avoided with regular home maintenance. That's different from a sudden weakness in your roof due to a storm or some other incident. Similarly, termite trouble is often expected to be discovered and addressed before your home sustains structural damage. Destruction due to pests is generally not covered by home insurers.

5. Someone else can pay for the claim.
We often think only about our own insurance company when we're in a traffic accident, but there's often another insurance company involved, as well. In states with at-fault insurance, if you're in an accident caused by someone else, you may be able to get the other guy's insurer to cover your cost, instead of your own insurer. This approach isn't always easy, though. Get some important tips from the Consumer Federation in its "Guide to Navigating the Auto Claims' Maze."

Longtime Motley Fool contributor Selena Maranjian holds no position in any company mentioned. Click here to see her holdings and a short bio.




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44 Comments

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mbergmeister

I have an independent insurance agency, www.myinsuranceguardian.org and have written a blog point on this topic. I agree that insurance companies don't want you to file a claim - you instantly become a liability on their book rather than a revenue source. Some states do allow you to self insure - Education is key when it comes to insurance, make sure that you are protecting yourself for large losses and you aren't throwing money away paying premiums that cover losses that you could handle yourself! Check out my thoughts @ guardianinsurancegroup.blogspot.com

July 25 2013 at 12:39 PM Report abuse rate up rate down Reply
Prafful Mathur

I am also a blog writer on www.mustinsureyourself.com...Thanks for sharing this information..i really wanna hats of your content writer and selection of Title...

February 22 2012 at 12:33 PM Report abuse rate up rate down Reply
Derrick Family

Insurance companies are so entrenched in lobbying Washington that it's become the foundation of corruption in the country. The need for insurance is fast becoming more of a liability than what it's intended. If we were to take our premiums and simply put them in an investment account (bonds) all but the most catestrophic of mishaps could feasibly be covered; we'd all be better off. Another thought would be to target a Roth IRA for investing the premiums and become self-insured. Couldn't the Roth IRA $'s be used for damage repairs without paying a penalty? I don't know, just a thought...

February 12 2012 at 11:39 AM Report abuse rate up rate down Reply
iocrealty

Life insurance can be a scam. You pay the premium for 20 years and 1/2 of that premium can be non taxable to the insurance company keeping that money from the tax man. Then that ½ is used with others premium ½ of others and the insurance company buys investments and that return on the investment ( Millions dollars in apartments etc.) return DOES NOT go back into lowering your premium but lining the pockets of the insurance company. The insurance companies are controlled by individual states which helps them get away with scaming. Insurance companies should be required to get a federal licanse to do business like commercial pilots.

Maybe term insurance should be for you ... . Lower cost to a young family when they needed.

December 27 2011 at 12:12 PM Report abuse rate up rate down Reply
obamabiddenladen

This column is about as laughable as the authors creditials. Looks as though Selena Maranjian needed a paycheck and coughed up a half-baked article about a topic she (clearly) has zero knowledge on.
Insurance company's pay out on water related claims EVERY DAY and it is their responsibiliity to ensure the cause of the water infiltration is fixed. These claims are handled NO DIFFERENTLY than any other claim.
Regarding "preventable" accidents, again, insurance company's do not require a termite certificate or require that your roof be replaced at a certain age....they just won't insured the home with a roof over a certain age.
Lastly regarding someone else pay for the claim: That's what we pay our agents for. My State Farm agent did all the leg work on a recent claim where I was hit from behind by a person who had Geico. State Farm paid for the repairs and then proceeded to go after Geico (Geico would have taken "6-8 weeks" for an adjuster to even see the vehicle). I asked if that would cause my rates to jump (which at 7 months later they have not) and he said they only charge for "AT FAULT" accidents and that they subrogated the claim to Geico and got all the money they spent to fix the car back.
Shame on you Motley for allowing such a half-cocked article to publish.

December 27 2011 at 11:40 AM Report abuse rate up rate down Reply
seattlewkr

Wouldn't everyone love to be in a business where you just collected money and didn't deliver anything for it?

INSURANCE is that business

December 27 2011 at 10:29 AM Report abuse +1 rate up rate down Reply
mildave

Hopefully Invest wisely with the Motley Fools,or another investment company, and set your undisturbed profits aside ( on interest ) for MINOR accidents and repair needs, Take out the most reputable home owner and an auto policies that you can afford, to cover the MAJOR claims. Maintain your home and auto as best you can afford,and drive sensibly.Don't play games with your insurance companies !

December 27 2011 at 9:19 AM Report abuse rate up rate down Reply
pozboys

Insurance companies do not do business to help people (probably last on the list of reasons for being) they are in business, to MAKE MONEY! The profit motive gets greater, as they publicly trade their stock, and the upper level executives, get richer! If you think that they want to payout ,for insuring your "whatever," think again! The real problem with the new insurance mandate, is that the private insurance companies, are the people, holding the purse strings, and as such, will determine the rates, and who is taken care of, and who isn't! It would have been more beneficial to the American people, if the government had been the insurer, but with the extensive lobby effort, by the insurance industry, and the political sellout, of the American people, we now have the result, about to be foisted on the citizens(suckers),of this fine country,to the enormous profit of the insurance industry, and who knows what , for the American people! Remember, as always, profit trumps compassion, EVERY TIME!

December 27 2011 at 8:45 AM Report abuse rate up rate down Reply
Bill

Just keep giving us your money but please do not file any claims or we will blacklist you at the first payout.

December 27 2011 at 8:35 AM Report abuse +1 rate up rate down Reply
mikcl1

This is a horse **** column written by insurance people, let me see, dont file a claim and , you really should buy some life insurance,what a load of crap.

December 27 2011 at 7:29 AM Report abuse rate up rate down Reply