File a claim or not?

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File a claim or not?

Postby camiboxer » Thu Apr 04, 2013 1:38 pm

In late January as my computer was being turned on my home lost electricity. Once the power was restored my computer would not start up. Diagnosed as a bad power source due to the power surge. Part was replaced but computer wasn't the same and the repair guy thought the hard drive might have sustained an injury as well. Issues got worse and finally last week the computer died. I also realized at the initial day of the surge my printer wouldn't power on and my monitor wouldn't shut off. I was okay with the monitor not shutting off and would eventually get around to a new printer purchase.
Ended up with new computer, printer, monitor, software to replenish what was on previous computer and a new surge protector. Total of $1381.24.

Last night the furnace went out. Repair guy today asks if we have had a power surge recently. Parts affected don't always stop working immediately but the damage caused can slowly get worse (burn up) over time until it won't work. If all goes according to plan we will have another $1,000.00 in this repair.
Power surge damage to replace/repair totals $2381.24. He will be checking the AC unit before he leaves to *hopefully* make sure it didn't suffer any damage.

Homeowners deductible is $500. If we make a claim we would get reimbursed for $1881.24 (assuming nothing else is affected). Nice to have that money but I wasn't planning on making a claim on something I feel is pretty insignificant and we can afford.
Hubby wants to make a claim stating "That is why we have insurance."
Also learned that upon renewal in November we would lose our $500 deductible as they do not offer it any longer and we have been grandfathered in but a claim would alleviate that option.
I have always thought along the lines of "Don't make a claim if you can easily afford the damages".
We have had two claims on our home in over 23 years. First was due to a lightening strike and somewhere around $7k. Second was due to a windstorm which resulted in us having to have a new roof. Just under $9k paid.

Any easy way to convince hubby to let this go or am I being the "dumb" one?
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Re: File a claim or not?

Postby Occupier » Thu Apr 04, 2013 11:24 pm

There is a rule of thumb that you should never insure for a claim you can afford to pay yourself. That just raises your rates. Also excessive claims can lead to your policy getting canceled which will cause you to pay more for insurance. That mostly applies to deciding how high a deductible to have in a policy, but I have, on occasion, not submitted small things to a carrier just to avoid a cancellation. My vote is for you, not your hubby. Raise your deductible so you won't have this argument in the future. It's amazing how much adding a few thousand to a deductible will reduce rates, compared to adding a hundred thousand to the limits of a policy. Dave
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Re: File a claim or not?

Postby Default User BR » Fri Apr 05, 2013 1:26 am

Occupier wrote:There is a rule of thumb that you should never insure for a claim you can afford to pay yourself.

How do you define "afford"? When I had 15k in hail damage, I could have written a check for it had I wanted. However, I filed an insurance claim.


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Re: File a claim or not?

Postby Mudpuppy » Fri Apr 05, 2013 1:54 am

I would first look into the reimbursement process through the power company. It can be tedious and have many barriers to success. You will need detailed documentation from the repair people and likely will also need the original parts. But there is no concerns about frivolous claims on your homeowner's policy.

You might also consider installing a whole house surge protector to guard against such damage in the future.
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Re: File a claim or not?

Postby Hawkeye5 » Fri Apr 05, 2013 9:01 am

Up to you, but as one who's employment as an insurance regulator places me in contact with non-renewed policyholders frequently I will tell you that my opinion is that should you file the claim and within two or three years there is a $10,000 loss from a storm it is very likely you will be non-renewed. Finding insurance, depending upon your state of residence, may well cost several times the power surge costs. Before you do anything, however, read your policy to make sure power surges are a covered peril. Lightning for sure, but perhaps not a power surge. The company will count a non-covered, closed without payment claim the same as one that was paid.

Most companies will no longer offer $500 deductibles. My personal HO policy has for years carried a $2500 deductible. I have a sinking fund that I put a few dollars in every month to cover the deductible.
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Re: File a claim or not?

Postby SamGamgee » Fri Apr 05, 2013 9:12 am

Default User BR wrote:
Occupier wrote:There is a rule of thumb that you should never insure for a claim you can afford to pay yourself.

How do you define "afford"? When I had 15k in hail damage, I could have written a check for it had I wanted. However, I filed an insurance claim.


Brian


The question is: Do you want to pay out more, in the long term, so as not to face the prospect of writing that $15k check unexpectedly? If so, keep the insurance. If not, drop it or raise your deductible.
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Re: File a claim or not?

Postby Default User BR » Fri Apr 05, 2013 11:31 am

SamGamgee wrote:
Default User BR wrote:
Occupier wrote:There is a rule of thumb that you should never insure for a claim you can afford to pay yourself.

How do you define "afford"? When I had 15k in hail damage, I could have written a check for it had I wanted. However, I filed an insurance claim.

The question is: Do you want to pay out more, in the long term, so as not to face the prospect of writing that $15k check unexpectedly? If so, keep the insurance. If not, drop it or raise your deductible.

That wasn't the original assertion. Of course, for anyone with a loan dropping coverage is not an option.

I only pay about $900 a year as it is. Even if my insurance doubled, it would take over fifteen years of increased premiums to equal 15k. As it was, the rates went up some, on the order of $50 a year fairly soon after. There have been more increases over the remaining years (this was in 2001) to get to the current level.

Using the "can you afford it" criterion is not a reasonable one. I can afford, as in have the resources to absorb, quite a lot. My portfolio twitches by several thousand one way or the other on a daily basis. But I wouldn't. If I had a $5000 storm damage claim now I'd turn it in. Higher deductibles can be an option, but you have to see how much it really saves you per year to see if it's reasonable.


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Re: File a claim or not?

Postby SamGamgee » Fri Apr 05, 2013 11:48 am

Default User BR wrote:
SamGamgee wrote:
Default User BR wrote:
Occupier wrote:There is a rule of thumb that you should never insure for a claim you can afford to pay yourself.

How do you define "afford"? When I had 15k in hail damage, I could have written a check for it had I wanted. However, I filed an insurance claim.

The question is: Do you want to pay out more, in the long term, so as not to face the prospect of writing that $15k check unexpectedly? If so, keep the insurance. If not, drop it or raise your deductible.

That wasn't the original assertion. Of course, for anyone with a loan dropping coverage is not an option.

I only pay about $900 a year as it is. Even if my insurance doubled, it would take over fifteen years of increased premiums to equal 15k. As it was, the rates went up some, on the order of $50 a year fairly soon after. There have been more increases over the remaining years (this was in 2001) to get to the current level.

Using the "can you afford it" criterion is not a reasonable one. I can afford, as in have the resources to absorb, quite a lot. My portfolio twitches by several thousand one way or the other on a daily basis. But I wouldn't. If I had a $5000 storm damage claim now I'd turn it in. Higher deductibles can be an option, but you have to see how much it really saves you per year to see if it's reasonable.


Brian


Recouping the claim is not really the point. The insurance company is charging you based on the actuarial present value of your future claims. There's a broad range of possibilities. You could have no more claims going forward. You could have lots of claims. If you are paying $900 a year, then on average, people like you cost the insurance company _less_ than $900 a year to insure. (If not they won't be around very long.) That means that considering all possibilities, buying insurance is a losing proposition on average. It's purpose is the insulate you from events whose cost you can't easily absorb.

The exception to this rule is if you know something the insurance company doesn't know about your risk profile. If you know that you are risker than average in a way the insurer can't measure, of course it makes sense to buy insurance because you'll be getting a bargain! But saying "I saw a $50 increase in premium after a $15,000 claim" is entirely besides the point.
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Re: File a claim or not?

Postby Mudpuppy » Fri Apr 05, 2013 12:38 pm

Hawkeye5 wrote:Up to you, but as one who's employment as an insurance regulator places me in contact with non-renewed policyholders frequently I will tell you that my opinion is that should you file the claim and within two or three years there is a $10,000 loss from a storm it is very likely you will be non-renewed. Finding insurance, depending upon your state of residence, may well cost several times the power surge costs. Before you do anything, however, read your policy to make sure power surges are a covered peril. Lightning for sure, but perhaps not a power surge. The company will count a non-covered, closed without payment claim the same as one that was paid.

A power surge caused by power company issues (instead of storm/accident damage) is a power company issue. That's why I suggested the OP first look into the power company reimbursement routine. Most power companies have a reimbursement method for damage caused by power spikes. However, it can require quite a bit of documentation. Always keep the original parts if you have such a situation.

In my case, my UPS went absolutely crazy when the power company installed a SmartMeter that transmitted data over the power line (by altering the frequency and zero crossings). After a few months of constantly cycling on and off battery, during which time I had been in communication with the power company about the issue, the UPS just up and died, even though it was still fairly new. I got a new UPS at no cost to me, but I had to ship the old one to a diagnostic center. Turned out that many UPS units and power conditioners didn't like the increase in zero crossings, so the power company ended up replacing all of the SmartMeters with ones that transmit over radio frequencies within a short period of time, starting with the neighborhoods that had filed trouble tickets and/or claims.

For cases like the OP, you really have to have documentation to show it was an abnormal death due to power surges. This is particularly true with older equipment, where the power company could just claim it wore out. Keep the original parts and have detailed reports by the repair people. There's nothing to be lost with asking the power company for reimbursement though. The worst they can do is say no.
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Re: File a claim or not?

Postby Default User BR » Fri Apr 05, 2013 1:37 pm

SamGamgee wrote:Recouping the claim is not really the point. The insurance company is charging you based on the actuarial present value of your future claims. There's a broad range of possibilities. You could have no more claims going forward. You could have lots of claims. If you are paying $900 a year, then on average, people like you cost the insurance company _less_ than $900 a year to insure. (If not they won't be around very long.) That means that considering all possibilities, buying insurance is a losing proposition on average. It's purpose is the insulate you from events whose cost you can't easily absorb.

I just don't agree with that. As I note, I can easily absorb a lot. So what should be my limit? 20k? 50k? Some percentage of net worth? Yes, filing a lot of small claims probably gets you dumped. But filing for a 5k storm damage is a reasonable use of insurance in my opinion. I just can't see fearing rate increases to that extent.


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Re: File a claim or not?

Postby SamGamgee » Mon Apr 08, 2013 8:18 am

Default User BR wrote:I just don't agree with that. As I note, I can easily absorb a lot. So what should be my limit? 20k? 50k? Some percentage of net worth? Yes, filing a lot of small claims probably gets you dumped. But filing for a 5k storm damage is a reasonable use of insurance in my opinion. I just can't see fearing rate increases to that extent.


Brian


Look, you're paying them premium and they're paying you for damages. So money is changing hands in both directions. Either you or them is going to end up ahead. Who do you think it is going to be? If you think the insurance company is losing money on your policy, you should keep it. If you think they are making money, but you can't afford the rare large loss that you're insuring against, again you should keep the insurance. But if you can easily absorb the loss you're insuring against, and you also believe that the insurance company is collecting more in premium than they're likely to pay out, then I have trouble understanding why that looks like a good deal.
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Re: File a claim or not?

Postby prudent » Mon Apr 08, 2013 8:52 am

To the OP's issue, I would not file a claim for these reasons:
1. No guarantee the claim would be paid. I think it would be an uphill battle to prove the damage was caused by a surge 3 months ago. If you begin a claim but don't get paid, the claim is still on your record.
2. I don't want to give the insurer a reason to drop us. A small claim might not do it but if a large claim followed later, the combination might be a trigger.

Raise your deductible so you aren't tempted to file claims of this size, and get a whole-house surge protector installed.
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Re: File a claim or not?

Postby jeffyscott » Mon Apr 08, 2013 11:00 pm

camiboxer wrote:Homeowners deductible is $500.

Hubby wants to make a claim stating "That is why we have insurance."

I have always thought along the lines of "Don't make a claim if you can easily afford the damages".

Any easy way to convince hubby to let this go or am I being the "dumb" one?


Well, I think it is foolish to have paid for a $500 deductible and then not make a claim for $2000...and most likely the foolish part was paying for the $500 deductible. If you are willing to absorb a $2000 loss then why not save on premiums by making that your deductible.
press on, regardless - John C. Bogle
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Re: File a claim or not?

Postby camiboxer » Tue Apr 09, 2013 10:25 am

jeffyscott wrote:Well, I think it is foolish to have paid for a $500 deductible and then not make a claim for $2000...and most likely the foolish part was paying for the $500 deductible. If you are willing to absorb a $2000 loss then why not save on premiums by making that your deductible.


A $2000 deductible would save us $26.00 a year on our policy. Hardly worth making the change IMO. Had it been $260....that would be something to consider.
This thread has taken on a life of its own but I wanted to give an update.
I was able to persuade my husband to let the claim go. We have 11 insurance policies with State Farm. I don't trust that rates would not increase no matter the amount of the claim.
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Re: File a claim or not?

Postby Mudpuppy » Tue Apr 09, 2013 3:47 pm

camiboxer wrote:
jeffyscott wrote:Well, I think it is foolish to have paid for a $500 deductible and then not make a claim for $2000...and most likely the foolish part was paying for the $500 deductible. If you are willing to absorb a $2000 loss then why not save on premiums by making that your deductible.


A $2000 deductible would save us $26.00 a year on our policy. Hardly worth making the change IMO. Had it been $260....that would be something to consider.
This thread has taken on a life of its own but I wanted to give an update.
I was able to persuade my husband to let the claim go. We have 11 insurance policies with State Farm. I don't trust that rates would not increase no matter the amount of the claim.

You should still look into asking the power company to reimburse damages. It doesn't count against your homeowner's policy to go through the power company's reimbursement process. There's a low likelihood of success, but maybe it'll make your husband happy to try.
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