Business owners Mobile Insurance serves often ask me whether to report a loss to their insurance company. Payment of any part of a claim is in the short term best interest of the client. However, some claims may result in a lower payout than the additional future insurance premiums charged by an insurance company because of the reported claim. Therefore, the key question is whether you will receive more benefits for this claim than you will be charged in future additional premiums.
Here’s a guide to help you answer that question. First, if it’s a large claim, it’s almost always best to report it. Insurance works particularly well with large claims. That’s a key reason why we buy insurance. Here, insurance proceeds and the legal protection you’ll be entitled to will far exceed any additional premiums you’ll be charged in the future.
Second, if there is bodily injury alleged, you should report the claim. The risk of not timely reporting the claim, and thus having it denied by an insurance company for failing to do so is too high. Legal defense costs alone can exceed six figures. In addition, medical expenses are bankruptcy high.
Third, if the potential claim involves damage to someone else’s property, unless the damage is very limited, you should report the claim. Insurance companies are professional dispute settlers. If you decide to handle this type of claim on your own, make sure the claimant signs a complete Waiver and Release prior to paying them anything. You don’t want to make a payment then have the claimant call and ask for more money a week later saying “you already agreed it was your fault.”
Fourth, if the potential claim involves only minimal damage to your own property, then it may be worth determining whether the damage exceeds your insurance deductible, and if so, by how much. Small property losses are the best type of losses not to report. They can result in future higher premium costs which exceed your settlement check. But before you handle the loss yourself, get an estimate of the cost to repair the damage. It’s not unusual for an estimate to show higher repair costs than a preliminary inspection might suggest.
Operating standards that incorporate loss control measures are the best way to keep insurance costs low. Mobile Insurance’s website (www.MobileAgency.com) has a section on “Loss Control” that includes Self Inspection Reports for manufactured home community, rental home, and retail center operations. Statistics show that $1 spent on loss control usually saves $10. And if you’d like a two and a two minute break, enjoy our attempt at humor in our new video on “loss control management” at here just a few ideas on how to reduce your risk of being sued for an employment related matter. If you’d like information on helping define if a worker is employee vs. a contractor, or exempt vs. non-exempt, then send me an email and I’ll forward you information on these issues.