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Claims and Your Insurance Rates

When is it time to contact your auto insurance or home insurance agent to file a claim?

You might be thinking, “Whenever my car or house has been damaged, like by an accident, or a disaster.” But deciding whether to file a claim can be a complex process. In some cases, a claim may cause an insurance company to raise your rates.  In other instances, a claim could land your name in a database that might make it difficult to get or maintain coverage in the future.  Before you file a claim, make sure you completely understand know how it will impact your future premiums and insurability .
Claims that spike premiums
Certain types of home insurance claims are more likely to trigger an increase in premiums. They include:
1. Dog Bites
2. Water Damage

3. Slip-and-Fall Claims

“The whole point of insurance is to make good on a loss, to make individuals whole again,” says Claire Wilkinson, the editor of Terms + Conditions, the blog of the New York-based trade group ‘The Insurance Information Institute”. However, 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. And in some cases, they may be correct.
The vast majority of consumer insurance claims are recorded in one or both of 2 databases: CLUE and A-PLUS. The larger and better-known database, CLUE, which stands for Comprehensive Loss Underwriting Exchange, is operated by the Ohio-based LexisNexis.  A-PLUS, which stands for Automobile-Property Loss Underwriting Service, is the other database. It is run by New Jersey-based Insurance Services Offices Inc. (ISO).
CLUE and You
CLUE is so popular 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,” says Fiona McCaul, a LexisNexis spokeswoman. 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,” McCaul says.  Homeowner claims and auto claims are registered in CLUE and A-PLUS. Health insurance and other types of insurance claims are not included.
It’s up to individual insurance companies to decide how to use CLUE data, McCaul says. However, insurers may rely on the databases — which originally were created to prevent insurance fraud — to research and screen applicants’ claim histories. In some cases, that can result in higher rates or difficulty obtaining coverage.
Do inquiries count against you?
Information found in these databases may be more expansive than many people realize. Privacy Rights Clearinghouse, a San Diego-based consumer group, warns that an insurance carrier may submit information to CLUE when a customer simply calls on an inquiry. However, McCaul says that practice is frowned upon.
“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,” she says. “For several years we have 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. In particular, many states have passed laws that regulate whether inquiries are counted as claims. Note that information is kept in the CLUE and A-PLUS databases for up to 7 years. Homebuyers cannot obtain CLUE reports on homes they are considering purchasing. But sellers can make the reports available. “Home sellers can use their CLUE report as a marketing tool to demonstrate to potential buyers that their home has not had a recent claim or large loss, if it has, to show that repairs were done properly,” McCaul says. “Homebuyers can make the purchase contingent upon the seller providing a copy of the CLUE report.”
Get your CLUE report
  • To get a free copy of your CLUE report, contact LexisNexis either online or by calling (866) 312-8076.
  • To get a free copy of your A-Plus report, contact ISO either online or at (800) 709-8842.
So, when should you file a home insurance claim? “There are no strict guidelines,” says Tim Bowen, an assistant vice president on the homeowners insurance team at MetLife. “These decisions are made on an individual basis on claims made by any insurance carrier’s customers.” Filing a single claim for home insurance generally will not result in higher rates. However, Bowen says that making 2 claims in a 3-year period is more likely to trigger a hike, although each company is different. Many companies base their decisions on how long you’ve been with the company and the nature of the claims. Also, most insurers say homeowner claims resulting from weather or other catastrophes typically do not result in higher rates.  So, which claims do pose a potential risk to your insurance rates or coverage?
1. Dog Bites
Dog bites are the largest single cause of home policy claims, according to Robert P. Hartwig, 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 the homeowner owns that breed, it may be difficult to obtain insurance.  A single attack is often 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 psychologist or trainer. Sometimes, the homeowner’s rates will then depend upon passing a probationary period, such as 6 months without an attack.
2. Water Damage
Water damage tends to set off a barrage of red lights 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. If an insurance company finds a history of mold or water damage, the new buyer may have problems getting home insurance, says Bankrate columnist Liz Weston, the author of “Your Credit Score” and “Deal With Your Debt.” “Be careful with a water claim,” she says. “Insurance companies aren’t as paranoid as they used to be, but many have begun to exclude mold coverage from their policies.”
Plumbing problems that cause damage inside a property also can be red flags for insurance companies, particularly if the repairs, or lack thereof, result in another, similar claim.  You might be better solving the water-damage issues yourself, especially if the damage is minor and involves broken pipes or leaks in window wells, walls and seams.
3. 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 single largest cause of emergency room visits. If a person is hurt on your property and files a claim with an insurance company, your rates may rise.
Auto claims are trickier
Compared with home insurance, it is much harder to pinpoint which types of claims may cause your auto insurance rates to spike.  For the consumer, automobile insurance is more volatile and very dependent on factors including your driving record, age and number of claims, Weston says.  Other rate-hike or policy cancellation triggers vary from state to state and company to company. However, factors that may be considered include whether you were driving while drunk, whether injuries incurred, and the severity and type of accident. Some companies have a policy to forgive a first accident, but such rules are not ironclad.
To keep your premiums from increasing, it’s usually a good idea to avoid filing an auto claim if you have accidents or damage totaling $1,000 or less. If you decide to take this approach, make sure to raise your deductible to $1,000, which can lower your premiums.  Paying out of pocket for damage covered by insurance is distasteful to many people. However, a series of small claims can result in increased premiums and possible loss of coverage. It gets back to the notion of what insurance is all about: bailing you out from a large disaster, rather than the small things that annoy rather than harm.
Avoiding minor auto claims
“There are folks who are so strapped for cash and living paycheck-to-paycheck that even a minor fender-bender would be a catastrophe, and in that case they might want to keep a low deductible,” Weston says. “But for most of us, you’d rather have money in the bank and cover the thousand-bucks deductible yourself.”  In addition, if you back your car into a telephone pole or another car and nobody is hurt, it might be better to just pay for the damage yourself.  “My feeling is that if you have a little accident that’s under the deductible, yes, your insurance company wants you to report it,” Weston says. “But you should at least consider just handling it out-of-pocket if no one was injured and no police report was filed.”
However, a word of caution: If you cause an accident involving other vehicles, you should report it to your insurance company, even if the damage to your own vehicle is negligible. The other party may, legitimately or not, file a claim for damages or injury. Having your version of the accident on record will go a long way toward having your insurance company on your side. Also, many states require accident reports to be filed by the police. If that’s the case where you live, your insurer will be sure to find out whether you report it to them or not.