If you own a business, you undoubtedly have business insurance to protect you in the event of damage to your property or bodily injury to someone on your premises. You pay premiums every month and ensure that your policy is up to date. So when something goes awry and you suffer financial damages, you will want to file a claim so you can be reimbursed for your loss. However, under some circumstances, doing so actually may not be a good idea.
When to File a Business Insurance Claim
In many cases, filing a claim with your business insurance carrier is absolutely the appropriate thing to do. These include:
- Liability claims: Damages due to bodily or personal injury for which your business is liable can add up very quickly, especially if you are sued. Your insurer will provide trained adjustors to act on your behalf. They will investigate the claim, meet with the involved parties and document what occurred. This is not a situation that you should attempt to handle yourself.
- Business interruption: If your business sustains property damage sufficient to interrupt normal operations, your business interruption insurance will provide funds to help you relocate, replace necessary business equipment and meet payroll for a specified length of time. This temporary life raft can keep your business afloat until all damages are repaired.
- Commercial vehicle accidents: Always report any accident involving a business-owned motor vehicle to your insurer. Even if the damage to the vehicle is minor, you could be liable for bodily injury to a third party or –if an employee was driving — injuries covered by worker’s compensation.
- To meet deductible amounts: Most business insurance policies have an aggregate deductible, which means that each insured loss counts towards the annual deductible on the policy. If you have already suffered damages that brought you close that amount, it may make sense to file a claim.
When Not to File a Business Insurance Claim
Although filing a claim with your insurer for a covered loss is always an option, you may face unintended consequences if you do. For example, if you file multiple claims for small amounts, you may never meet your annual deductible (which means your insurance company doesn’t pay.) Nevertheless, based solely on your claims history, your premiums could go up.
According to a recent study by The Hartford, burglary and theft accounts for 20 percent of all business insurance claims, but the payouts on these claims tend to be fairly low (about $8,000.) If your annual deductible is considerably more than the amount you will recover if you file a claim, you may wish to cover the damages yourself.
Remember, too, that claims stay on your record for seven years, even if you switch insurers. Although your premium rates are based on many factors, a history of repeated claims can mean higher premiums in the long run.
Some other instances when filing a claim may not be in the best interests of your business include:
- Water damage: Some insurers will drop an insured after he files a claim for water damage, because water can lead to mold. Mold is notoriously difficult to eradicate, expensive to mitigate and tends to recur.
- Deferred maintenance: If you sustain property damage or a liability claim because of your own failure to perform routine maintenance, your claim will almost certainly be denied.
If you decide to file a claim with your insurer, do so promptly and make sure you have all the documentation you need. It’s a good idea not to make any repairs until an adjustor has seen the property and the company has approved the claim. However, it’s important to take measures to mitigate further damage, such as removing equipment from a damaged building or covering a damaged roof.
Making insurance decisions is often difficult and time-consuming. That’s why it’s so important to have a trained agent in your corner, helping you make choices that make sense for you. Our business insurance experts are available every weekday from 9 a.m. to 6 p.m. to discuss your needs, so call us at 516-292-3780 or request a free consultation online now.