often hear, “Why did my rate increase? I have never filed a claim!” Let’s look at some of the reasons you may be paying more:
HOW RATES ARE CALCULATED
Insurance rates are determined through a complex process that accounts for various factors, which range from personal information like age, gender, marital status and occupation to your claims history, including frequency and severity.
Any claim, even if withdrawn and $0 paid, will detrimentally impact your premium for five years. So before you file a claim, make sure your damage exceeds your deductible or you will receive no claim settlement and your rate will still be impacted. Once a claim is initiated, there is great expense borne by the insurance company to mobilize adjusters and prepare the extensive documentation required for a settlement. Even if nothing is paid, there is a cost.
SUFFICIENCY OF COVERAGE
Another variable impacting rates is sufficiency of coverage. if your limits are not correct, then your rate for coverage is calculated at a higher factor than if you had adequate coverage. Therefore, you may pay a lower premium in the short term, but in the long run, you won’t have enough protection. Ironically, being correctly insured would only have cost a little more.
NATURAL DISASTERS — AND OTHER FACTORS YOU CAN’T CONTROL
Another major factor is proximity to disaster zones, which encompasses weather, crime or even heavy traffic. Many components outside of your control can impact your rate, such as inflation, global events, regional disasters or legislative changes that don’t impact you personally but can cause your rate to be higher.
Factors vary among insurance types, and different insurance companies may weigh them differently. It’s always a good idea to shop around and compare quotes from multiple insurers to find the best rates for your specific needs.
REVIEW YOUR COVERAGE REGULARLY
Reviewing your insurance policy each year is a wise decision. Share changes in your life with your insurance agent, such as marriage, divorce, children, a new home or a new business. Check often for new discounts, additional coverage options or better terms.
Another area to confirm is your coverage adequacy: Do you have more valuable assets requiring additional coverage, or have you downsized and reduced the need for certain types of coverage? Will your coverage allow you to rebuild your structure and replace your contents? It might be time for a coverage increase.
Insurance provides peace of mind, knowing that you have financial protection in case of unforeseen circumstances. It’s always a good idea to carefully read and understand your insurance policy so you know what is covered and what steps to take when filing a claim.
