What happens when you file an insurance claim? You don’t want to do that, right? Or do you? We give you an in-depth look at what filing an insurance claim – how to file, what you need, and what to expect from your insurance provider. Finally, if you file a claim, will your insurance go up?
To help, we reached out to Greg Raymond, CEO at Insurancehero.ca, an insurance brokerage, to gain some insurance claims advice and some real insights about what it looks like on their side. Let’s start with the basics.
What is an insurance claim?
After a risk becomes a reality, you make a formal request to your insurance provider to cover the costs of a covered loss or policy-related event.
A home insurance claim may be due to a basement flood from a burst pipe. You’d make a claim for the damage to the flooring, drywall, and other renovation costs. You’d also claim personal property lost or damaged by the water.
A life insurance claim you’d make on behalf of the deceased, and, after submitting death certificates, your insurance agent will walk you through the steps to handle the policy payout.
An auto insurance claim could be to cover the damage from a collision. Most of Canada operates under no-fault insurance, so whether you’re at fault or not, you’ll work with your own insurance provider to process the claim and its payout.
Before you call your insurer asking for money, there are essential things to consider.
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Before you file an insurance claim
- Be safe – take whatever precautions you need to find safety or reduce further risk to yourself and your property.
- Take photos or videos of the damage to your home or vehicle with your phone. It’s critical evidence and proof to your insurer.
- For your home, create a list of all damaged or lost items. Make sure to be thorough and complete when you’re making a contents insurance claim. Don’t be opportunistic and list items you don’t own, that’s insurance fraud, and your claim could be thrown out.
- For your vehicle, take notes of all the drivers involved, their cars, and insurance policies. (For more details, read our blog: What to do after a car accident.)
- Avoid repairs. Unless you have to fix something immediately to mitigate further damage, it’s best to leave things to the professionals – be it a mechanic, a contractor, or the insurance adjuster.
- Prepare to speak with your insurer. They’ll want to know what happened, in your own words, and what you’ve done thus far to fix the problem. It’ll likely be a long conversation with many details, so get comfortable.
If you’re in a car accident, “You should go [to the collision reporting centre] as soon as practically possible,” according to Mr. Raymond. While you can take your car to any mechanic, “If you choose one of your insurance company’s preferred vendors, the repairs are guaranteed.”
Know your policy. Collision insurance covers you for an at-fault crash, but it also covers you for a hit & run. Raymond says to buy an accident forgiveness option in their policy, otherwise you will be affected by at-fault claims for many years.
For home insurance, you need to understand the difference between ACV and replacement cost. According to Raymond, “there are several components of a home that can have an effect on the ACV value. For instance, age of the roof, condition of the home, types and updates of mechanical, plumbing, electrical and HVAC systems.” While most home insurance policies use replacement cost (meaning full coverage without any depreciation), it’s essential to know how you’d be paid out.
Most car insurance policies are actual cash value. Your new $20,000 car you bought a year ago, is worth much less when you calculate depreciation to know what you’ll receive if your vehicle is a total write off.
The first steps of an insurance claim
Call your insurance provider’s emergency helpline for anything urgent such as burst water pipes, flood damage, smashed windows, and broken locks. It’s essential to know your policy and understand your coverage. Still, your provider can walk you through your policy coverages if you’re unsure. Raymond says, “a lot of clients purchase insurance thinking they won’t be needing it, which can cause issues when claim time comes.”
For instance, “Clients are often unaware that when you purchase a used vehicle, and you buy the extended warranty, the value of that warranty isn’t covered if the vehicle is written off. Because technically that warranty (while included in the purchase price) is a separate product,” says Raymond.
Knowing your policy is critical because it helps you understand your coverage and what you’re paying for. Insurance for flood coverage started outranking fire as the number one claim. Still, most home insurance policies only cover a burst pipe, not a sewer back up or a rising lake.
Should you make an insurance claim?
If the claim is more than the deductible (the part you pay to your insurer before they release any money), it’s likely worth it to make a claim, but your insurance broker is there to help you.
In Raymond’s words, “Our role is to advise our clients which products to purchase and when it’s recommended they use those products. We look at the impact a claim will have on their premiums (over many years) and the deductible amount, to then factor whether putting in the claim will be cost-effective. Clients shouldn’t file multiple small claims. Because their current insurer may no longer choose to insure them, making it difficult to later find coverage.”
Does an insurance policy always go up after making a claim?
“If clients don’t purchase the accident forgiveness or claims protector, their premiums will be affected by an at-fault claim (auto) and any type of claim (property).”
Typically, young drivers pay more for car insurance. At age 25, they start to see a reduction if they’ve been claims-free. So, if you start at zero, and drive claims free for 6 years, you’re at a 6. If you’re get in an at-fault accident, though, you drop back down to zero and will have to earn back your cheap car insurance. After an at-fault accident, according to Raymond, “your driving record can be affected for many years hence why the accident forgiveness is worthwhile.”
After 3 years of no insurance claims, you may qualify for a “claims-free discount,” which could be 20% off your premium. However, as Raymond points out, “If you put in a claim (regardless of the claim amount), you would lose the claims free discount for 3 years. Think of 20% of premium [for] 3 years to see if it’s worth putting in that claim.”
Let’s do the math to better understand. A broken window may cost $1,000 to replace. The average Ontario home insurance premium is $1,280. Filing that $1,000 claim will cost you $768 in additional premiums. Plus, you may have to hold off on any other insurance claims moving forward to keep the premium from escalating further. It’s a choice and a risk, and that’s where a broker can help you, so take advantage.
The broker’s role is to explain the insurance claims process, what to expect throughout and to be there for the client. Raymond adds, “It’s important to explain [the insurance claims process] at the beginning, especially for first-time claimants. It’s also even more important to explain during natural catastrophes where insurers’ resources are maximized. [The] Ottawa tornado took much longer than expected to have claims looked at and repairs started).”
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How long does an insurance claim take?
A basic auto insurance claim (such as a fender bender), “the whole process can be wrapped in about a week.” says Raymond. But, he warns, “this all depends on the complexity of the claim, the insurance product purchased, whether there is litigation involved or not.” In most cases, your insurance company will pay the repair shop after you’ve paid the deductible if required.
Complexities will slow the insurance claim process. A friend opted to have her car towed to London from Toronto due to familiarity with the mechanic. The communication, paperwork, and lack of direct contact slowed the process. Raymond says, “if the client isn’t agreeable with the settlement offer or if parts are on backorder,” could also see timeline extensions. Natural catastrophes, like wildfires of floods, where insurers resources are maximized, “took much longer than expected to have claims looked at and repairs started,” adds Raymond.
So, to expedite the process, have your details, know your facts, and work with your insurer. Follow recommendations, more so if you have injuries as a result of the claim because your family members will need to step in to ensure necessary documentation is signed.
Did you know?
By law, car insurance includes statutory accident benefits (SABS), which pays for rehab services and replacement income, among other things, but there is a cap. Alberta car insurance gives you the lesser of $400/week or 80% of your net income. In contrast, BC car insurance pays out $740/week for income replacement.
The claims process closes once a claim is settled, signed by all parties, and the monies are exchanged.
The bottom line
Be prepared. It’s the easiest way for a smooth claims experience. Know your policy, and if you have questions, ask them. Take inventory of your contents digitally, so they aren’t lost in flood. Explore add-ons to your insurance policy and ask if it’s right for you.