To Claim or Not to Claim

You’ve got a policy with a $500 deductible, say, and you’ve just suffered an $800 loss. Any elementary school student can tell you that your net insurance recovery will therefore be … zero, if you’re smart. Why? Because the smart thing ordinarily would be not to make a claim. In the first place, you spare yourself the hassle. But mainly, you forego the possibility of losing your status as a preferred risk.

Regulations vary from state to state, and policies for dealing with such situations vary from insurer to insurer … so it may sometimes be fine to file such a claim. But it is a statistical fact that people who file a claim are more likely to file another one than people who haven’t — so insurers prefer customers who don’t file claims.

Clearly, it’s a matter of judgment. If you had a $500 deductible and a $520 loss, you surely wouldn’t file the claim. (Would you?) If you had a $500 deductible and a $6,000 loss, you almost surely would. (Wouldn’t you?) Where do you draw the line?

Your agent can give you good advice in this regard, if you buy auto insurance through an agent; and you may even get some helpful advice from your insurer’s phone reps if you buy insurance direct.

But this is one more reason to take large deductibles. The first reason: Why pay someone to take a risk you could afford to take yourself? Over a lifetime of self-insuring for such small risks, you’ll get to keep all the money that would otherwise go to insurance company overhead and profit. The second reason: It’s less hassle not to have to involve an insurer in the small stuff. The third reason: Why pay for coverage you might not even use in the first place?