Most everyone knows that having claims on your record with insurance companies can affect your future rates. And we know that sometimes making claims is unavoidable, because after all, getting reimbursed by your insurance company is the primary benefit of carrying insurance! But what happens far too often with consumers is that they suffer the mark of a claim on their record but don’t receive any reimbursement! It’s the dreaded $0-pay.
Every company is different of course, so I can’t speak for all of them, but did you know that even calling in to discuss a hypothetical claim with your insurer can appear as a $0-pay on your record? Or that if you make a claim and don’t get any money from your insurer due to deductible or claim denial that your record will still reflect that a claim was made for $0?
Here’s the worst part: With fire insurance (home/renters/condo/townhome/etc), insurers are more concerned with claim frequency than claim severity. That means that those pesky $0-pays on your record can be just as harmful to your rate and your ability to switch insurers as a $100,000 claim where half the home needed to be rebuilt. With most insurers, you become uninsurable as a consumer when you have as few as 2 claims in 3 years. This will prevent you from switching insurers when the rate that you pay skyrockets because of the claims you made. You may even be at risk of getting dropped altogether by your current insurer, forcing you to buy insurance from your bank or the state government for exorbitant premiums.
Another risk with $0-pays on your record is that it limits your options should something severe happen in the future that actually warrants a large claim. What if you made a claim for your stolen iPad but didn’t get any reimbursement because your deductible was $1000, then a thief breaks into your home over Christmas and steals $10,000 worth of jewelry and presents? Making a second claim here could get you dropped. This is why the decision to make a claim should be heavily thought through.
So how do we avoid $0-pays? Start by having an agent that actually looks out for your best interests. Before calling that 1-800 number, use every available resource to determine the approximate value of your loss as it compares to your deductible. There are dozens of home restoration experts who would love to give you a free estimate in an attempt to win your business. If that snag in your roof is valued by a contractor at $1400 but you carry a $1500 deductible, it’s not worth making a claim! It seems elementary, but too many people call the insurance company before they call their agent or get a third party estimate. Control what you can control. Don’t give your insurance company more ammunition to justify raising your rate even further. It’s probably going to go up moderately due to inflation and company loss ratios anyways – don’t let it be a spike.
Let your agent work for you and represent you! That’s where you’ll get true value out of a relationship with an agency!