Insurance is nothing more than a mechanism allowing
people in similar circumstances to share their losses. In any given year,
people who have accidents collect from those who don't. The insurance company
is just the collection basket.
When you buy car insurance, you get grouped, and
share losses with, people similar to you in age, location, use of car, and
driving record (tickets and at-fault accidents). When any of these factors
change, you move to, and share losses with, a different group of drivers.
(Remember when you turned 25 and your rates dropped 30 percent? On that day,
you weren't a better driver than the day before, but you transferred to a group
of more experienced drivers who have fewer accidents and lower premiums).
Similar changes in your insurance rate happen when
you move from one city to another, one zip code to another, or change the use
of your cars, or when you get tickets or are in an at-fault accident. You
simply change groups. When you hit a post and file a claim, you change groups -
just like when you get a couple of speeding tickets.
Before you file a small claim with your insurance
company, find out first how much more you'll pay over the next few years in
insurance premiums. If it's greater than the claim value, you're probably
better off paying the claim yourself.
Your agent, if you have one, should always warn you
of this pitfall when you report a small claim, it’s always best to communicate
with your agent in these situations. There have been many times when homeowners
with captive companies (AAA, Geico, Progressive) didn't have agents to discuss
claims with and could have prevented major longterm increases in premium and
cancellation notices.
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