Is My Insurance Company Going to Drop Me If I File This Claim?

This is a thought that has gone through most of our minds. I know it has mine, when I have filed a claim. This is a legitimate fear that comes with filing an insurance claim; for either your Auto or Homeowner’s Policy. Unfortunately, there is no hard and fast rule to figure out if you will be dropped. However, what I can do is share my experiences with you to help you make a decision. First and foremost, we buy insurance to protect ourselves and our families for the “what if’s” in life. Insurance exists for life’s risks, to help us through a possible “what if”. What is a risk? In insurance a risk is considered the uncertainty that we face in life and business every day. It is the uncertainty of an outcome. Insurance is quoted based on hazards. A hazard is a condition that increases the probability of a loss occurring or what might affect the size of a loss. There are several classes of hazards (see my article on Insurance 101, for an explanation of these). As the insured you have paid your insurance company to protect you in these situations. The insurance company is there to protect you. Are they going to happy to hear from you when you have to file a claim? No. However, claims are what they do! They are there to protect and assist you in times of trouble (as long as you have proper coverage!). If you are anything like me, you spent countless hours getting insurance quotes trying to find the best coverage for your money. When it comes time to collect on that coverage you will probably be greeted with empathy rather than with excitement. Do not hesitate to file an insurance claim if you have a legitimate claim!

Most of my clients are first time claim filers. However, I have had my fair share of clients that have had multiple losses, and some that shamefully brag about it. Six years ago, I had a particular policyholder in Cary, North Carolina; whom was on her fourth loss in a two year period. To this day, she still has the same insurance company with no coverage issues! Nevertheless, two years ago I had a policyholder in Davidson, North Carolina whom had all of their policies (multiple residences and vehicles) with the same insurance company. The claim went very smoothly and I never questioned the likelihood of this family being dropped; there was no doubt in my mind that this claim was legitimate. Within two weeks of completing their $60,000 reconstruction and $128,000 of self-paid upgrades, she called me up and asked me to lunch. At lunch she handed me a letter from the insurance company stating they were terminating her policy. Looking back on this particular claim, I don’t believe they were dropped due to filing this claim. This home sat empty for over a year (it was on the market and the family had since moved). This particular policy had verbiage that read that the home could not be vacant for more than thirty consecutive days (this is very common verbiage in homeowners’ policies). Mrs. Policyholder was very upset because they paid faithfully since the inception of their plans. However, they did not know their policy as well as they had thought. Knowing the house was vacant for 30+ days they could have saved themselves the turmoil by calling XYZ Insurance Company and paying for the additional coverage.

Insurance Companies don’t want to lose you as a customer. If they dropped every policyholder that filed a claim they would be out of business. Don’t take advantage of your insurance policy assuming they need your business, but don’t be scared of your policy either. Know your policy. Have a good understanding of what is and is not covered under what circumstance. Also, understand that as a policyholder, by signing up with your insurance company you are entering a contract. That contract states that you are required to protect your insured asset from further damage. What this means is that if you do have a loss, you are responsible for mitigating as soon as you are aware of the loss. Your insurance company is not going to deny a reasonable mitigation claim because you called Sam the restoration contractor when a storm blew a tree onto your roof or your child left a bathtub running which flooded parts of your home. You are responsible to start (or rather, hire a professional) to start mitigating the loss. Now, Sam’s bill might be $3,000. The insurance company is going to have him give proper detail and provide an insurance program based estimate (his chicken scratch on a “bid sheet” most likely will not be acceptable to the insurance company). This is why it is important to work with a reputable restoration contractor who specializes in insurance related work. Any professional restoration firm will guarantee that they will work with your insurance company. Insurance and Restoration companies use a very specialized and exact estimating program. This is how the insurance companies avoid being ripped off by contractors like Sam; coincidently this is the same program that protects you and the settlement amount you/your contractor will receive for the loss.

My advice to take away from reading this article is this: if you have a legitimate claim and you think it is going to be over your deductible, call your insurance company and talk to a Customer Service/Claim Rep. Most CSR’s will tell you if they don’t think you should file a claim! I have actually seen this several times. This does not mean they are denying your claim, nor does it mean you shouldn’t have the repairs made. It means they know that either you’re at risk of being terminated (most insurance companies have company regulations that state that they cannot inform you of that information, as it is usually only a possibility) or, they feel that the loss will be under your deductible. With this being said, if Mary Smith has a leak in her bathroom and she files an insurance claim, they may refer her to a restoration contractor. Mary calls Executive Restoration who comes out to perform a mold inspection and begin mitigation. The tech removes the unsalvageable items and sets equipment for drying. Mary then has them write a repair estimate. Mary’s deductible is $1000.00. The repair estimate is $558.72. Mary would be paying the company this amount directly (your deductible is the first money in an insurance claim). The restoration company recommends that she cancel the claim. Before cancelling the claim she should ask for the mitigation bill (mitigation and reconstruction are almost always separate bills, even if it’s the same contractor) If the amount is near or under her deducible for the two combined estimates, Mary should call her insurance company and cancel the claim. Please, always make sure that you have the total estimates for both your mitigation and reconstruction before deciding to cancel a claim!

Satria Permadi

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