Claims That Boost Your Insurance Rates

[Ban Hammer 14,293]

When should you make an insurance claim?

For many, the answer is a no-brainer: "Whenever I have an accident or suffer damage to my house or car."

Unfortunately, the decision about whether to file a claim is rarely so simple. In some cases, making a claim may cause an insurance company to raise your rates.

In other instances, the decision to file a claim could put your name into a database that makes it difficult to get or maintain coverage in the future.

Insurance is there to give you peace of mind and to restore a damaged car or property to its original state.

"The whole point of insurance is to make good on a loss, to make individuals whole again," says Claire Wilkinson, vice president of global issues for the New York-based Insurance Information Institute, an organization focused on improving public understanding of insurance.

However, before you make another claim, make sure you know how it could come back to haunt you.

Database Danger

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.

Unfortunately, in some cases they might be right.

The vast majority of consumer insurance claims are recorded in one or both of two databases: CLUE and A-PLUS.

The larger and better-known database -- CLUE, which stands for Claim Loss Underwriting Exchange -- is operated by Georgia-based ChoicePoint.

A-PLUS, which stands for Automated Property Loss Underwriting System, is the other database. It is run by New Jersey-based Insurance Services Offices Inc.

ChoicePoint's CLUE is so popular that people in the insurance industry often refer to reports generated by either database as "CLUE reports."

"More than 98 percent of insurers writing automobile and homeowners coverage provide loss data to the CLUE databases," says Fiona McCaul, corporate communications manager of ChoicePoint.

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 are not registered.

McCaul emphasizes that ChoicePoint does not determine how the information in its database is used. That is up to individual insurance companies.

However, insurance companies may use these databases -- which originally were created to prevent insurance fraud -- to research and screen applicants' claim histories. In some cases, this could result in higher rates or difficulty obtaining coverage.

Information found in these databases may be more expansive than many people realize. For example, the Insurance Information Institute warns on its Web site that an insurance carrier may submit information to CLUE when a customer simply calls on an inquiry.

However, McCaul says ChoicePoint frowns upon that practice.

"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 or not inquiries are counted as claims.

About one-third of states have passed legislation regulating how these databases can be used, according to the Insurance Information Institute Web site.

"All 50 states require insurance companies to file their rating criteria and premium structure with regulators," McCaul says.

This means any decision made by a carrier must comply with the information filed with -- and in some cases approved by -- state insurance regulators, she says.

Data is kept in CLUE and A-PLUS for five years, although some states can pass legislation that requires information to be kept for longer, so long as these laws comply with restrictions established by the Fair and Accurate Credit Transactions Act. For example, in California, car insurance claim data is held for seven years.

Homeowners Insurance: When to Think Twice

So, when should you file a claim?

"There are no general guidelines," says Tim Bowen, director of homeowner property claims for MetLife. "These decisions are made on an individual basis on claims made by any insurance carrier's customers."

Filing a single claim for homeowners insurance generally will not result in higher rates. However, Bowen says that making two claims in a three-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 related to the 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?

Dog bites. Sorry, Rover -- 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 a "psychologist" or animal trainer. Sometimes, the homeowner's rates will then depend upon passing a probationary period, such as six months without an attack.

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.

Homebuyers cannot obtain CLUE reports on homes they are considering purchasing. However, the homebuyer's insurance company can obtain the report in deciding whether to insure the home.

If the insurance company finds a history of mold or water damage, the new buyer may have problems getting home insurance, according to Liz Pulliam Weston, author of "Easy Money" and columnist for MSN Money.

"Be careful with a water claim," she says. "Insurance companies aren't as paranoid as they used to be a few years ago, but many have begun to exclude mold coverage from their policies."

Plumbing problems that cause damage inside a property also can be red flags to 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.

Some home sellers may actually use CLUE reports to their advantage, McCaul says.

"Home sellers can use their CLUE report as a marketing tool to demonstrate to potential buyers that their home has not had a loss claim or, if it has, to show that repairs were done properly," she says. "Homebuyers can make the purchase contingent upon the seller providing a copy of the CLUE report."

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 someone hurts themselves on your property and files a claim with their insurance company, your rates may rise.

Auto Triggers

Unfortunately, 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 driving record, age and types 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.

"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 caused an accident involving other vehicles, you should report it to your insurance company, even if the damage to your own vehicle was 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 they are, your insurer will be sure to find out whether you report it to them or not.

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[one...two...tree 2,762]

Wow, I didn't know that some homeowner insurance policies will cover dog bites. I wonder how many dog owners include that in their policy?

[almaty 19]

i got donkey bites on mine

[one...two...tree 2,762]

i got donkey bites on mine

[mawilson 2,133]

Wow, I didn't know that some homeowner insurance policies will cover dog bites. I wonder how many dog owners include that in their policy?

What about cat scratches?

[one...two...tree 2,762]

Wow, I didn't know that some homeowner insurance policies will cover dog bites. I wonder how many dog owners include that in their policy?

What about cat scratches?

You dare your neighbor to sue.

[almaty 19]

Wow, I didn't know that some homeowner insurance policies will cover dog bites. I wonder how many dog owners include that in their policy?

What about cat scratches?

Once, i got cat scratch fever..got it from the pu##y nexts door

[Jenn! 918]

"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."

That's not true. One of the reasons that deductibles exist is to eliminate the insurer's expenses from handling frivolous claims.

[Kazan' Tiger 1]

I don't think it needs to be specifically included. It should be in the same part of the policy that covers an individual for any injury on your property. I believe this is because a domestic animal is considered, by law, property too. I was bit once while out running, and the dog owner's insurance company contacted me to pay all medical bills and a replacement shirt, since the dog tore it.

Wow, I didn't know that some homeowner insurance policies will cover dog bites. I wonder how many dog owners include that in their policy?

[Ban Hammer 14,293]

i got donkey bites on mine

i thought you'd have donkey punches on yours instead