Why claiming on your insurance is a bad idea

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Living in a faster paced society, and commonly having to work harder for our money than we did 10 years ago. Many people look at their insurance as a quick way to make some money when the smallest of accidents happen.

With people being quicker to claim on their insurance today compared to 10 years ago, the costs of policies are skyrocketing. It is fair to say people think they are being clever to claim £500 worth of damage that ultimately they can live with or afford themselves. But when their renewal is due and they see that the claim has added £400 to their premium, they soon start to regret their decision.

Insurance companies look at all candidates as a risk profile, gauging the level of risk that person poses on their policy and ultimately likelihood of the them (the insurer) having to pay out.

As such, if you are making claims for small things that are not really claim worthy, your risk profile increases and so does your policy. This cycle lasts for about 5 years from each claim (the declaration period).

For instance, a body repair garage may be tempted to claim on their Bodyshop Insurance for a minor incident that they could resolve without claiming.

The maths is quite simple, for example you make a claim for £500 worth of damage. You pay say £100 excess (at best), so you get £400 claim money (£500 if the insurer covers the excess on successful claims). You cover your damage and carry on working. Then, your renewal comes round and is £400 more expensive (across all companies), suddenly you have broken even and faced with a higher policy or no insurance (which is illegal).

Assuming you wish to remain legal, you pay the additional fee, year 2 renewal arrives and your policy drops by only £150, this now means that the claim you thought was clever to make has now cost you £250, year 3 it will add another £150 to the cost giving a total of £400 loss over 3 years. Now you have to ask yourself, was that claim really worth it? The answer is no.

Benefit of not claiming on your insurance

The benefit of not claiming is you start to present yourself as a low risk profile in which the cost of your policy starts to drop, saving at times up to 75% if you are completely claim free.

By also presenting yourself as low risk, more insurance companies will be prepared to quote on you and have you on their books.

Of course, if it is essential that you claim, that is what your insurance is there for and claim if you must. But if you don’t really need to claim and you just want the money, then you are better off financially not claiming.

Check out our guides on saving money on your insurance, we have wrote them for ‘Save Money on your Courier Insurance’, ‘Save Money on your Fleet Insurance’, ‘Save Money on your HGV Insurance’ and ‘Save Money on your Motor Trade Insurance’.

** The workings out on this post are examples and may vary from insurer to insurer.