We have learned the hard way over the years to think twice before we make an insurance claim. In the long run, it could cost you more in headaches and expenses than you expect. Health insurance is the only insurance that expects you to make claims and actively use them.
Unfortunately, Auto Insurance, Homeowner’s Insurance, Renter’s Insurance, Umbrella Insurance, and many more can penalize you if you make a claim. It is supposed to be used in an emergency. Of course this depends on your state’s laws and regulations. When we were in Texas, my uninsured motorist (hit and run) did not count against us because of the laws at the time.
The hardest part is it’s not just the one type of insurance that gets hit, but all of them. So if you make a Renter’s Insurance claim in California because your landlord’s house flooded and your stuff was destroyed, then your rentals in Virginia could also increase at renewal. I also recently found out that merely the act of calling an insurance agent could raise your insurance premium. For someone like myself who has over ten different types of insurance, this could really impact my bottom line.
Remember: an insurance company makes money and is successful based on its number of clients who don’t cost them money. The higher the risk, the more you pay. An insurance company tracks EVERYTHING to try to reduce the risk as much as possible.
As an empire building landlord and frugal wife who enjoys spending her money on travel and not other costs, here are some tips to keeping those insurance costs low while still protecting you, for those Murphy moments that you have been paying for!
6 Insurance Mistakes to Watch Out For:
1. Don’t Pose “What If'” Situations if Possible.
Be careful about calling an insurance company and asking “what if” questions. While it is certainly the most accurate way to find out information, depending on the company and situation it could count against you even if you never put in a claim. Remember: they are trying to reduce risk. This is one of the few situations where asking your friends and social media avenues are actually a safer source even if they are less reliable.
2. Reserve it for a True Financial Situation.
This type of insurance is best for those major events. I have crashed two cars over the past eight years and we would have been in a world of hurt without insurance. So filing a claim was the best situation and we have no regrets. Where the regrets come in is when my husband filed a claim for $1,200 for his bent rims when he ran over something in the road. While at the time that was a lot of money, it followed us around for years, and we paid for it since our insurance went up considerably. It impacted us to the point that USAA would not renew our insurance and dropped us.
3. Increase the Deductible to the Point Where It’s Worth it to File.
Many people increase their deductible to the point that it would be worth the hit to file a claim. Not only does this reduce the cost of your insurance (higher premium typically means lower costs), it also helps you make it worth it before filing a claim since those $500 claims hurt too! The worst is when the $500 or $1,000 push you over when you have a big one.
4. Don’t File When Other People Cause the Damage.
I always cringe when people say the landlord should file the claim for tenant damages and the tenant should just pay the deductible. The issue with that is that this is hurting the landlord’s credit with the insurance company. They will be paying for years to come.
Personally, I will not file any damage that I did not cause. Yes, if the water main breaks that is on me, but if the tenants destroy my house and do $20,000 of damage, then no, I am not filing it and I will have them just pay my $1,000 deductible. They destroy it they pay for it, because they will not be paying my higher $300 a month premiums for the next 4-7 years. (Numbers are fake and are used to just prove the point).
5. Compare Different Insurance Companies.
We have a different insurance company for every state. Over the years I have found that different companies specialize or have better prices than others. I always call around to all of the different companies to see who has the best deal in that specific area. This has done a lot to keep the price down.
We have learned over the years that bundling as many insurances together does us a world of good regarding the price. We have been able to save a lot of money by having one insurance for all of our insurance needs. The only thing where this differs is with our houses, since the insurance has to originate in the same state.
Unfortunately insurance is often times darned if you do, and really rushed if you don’t. The key is to use it as an asset and a tool, not a piggy bank. This is that piggy bank you really don’t want to smash unless it is a true emergency. Otherwise the price could be too high when you really do need it.
What are some insurance mistakes you have found over the years? What has been your experience?1