Should You Limit Your Insurance Claims?

If and when you find yourself shopping around for insurance, a fun exercise you might want to try is to check out customer reviews. You’ll be hard-pressed to find a single laudatory comment or approbatory missive in the hundreds of posts you’ll read from aggrieved insurance customers.

In fact, most of what you’ll come across is a lot of fuming policy holders, each with a story of how their particular crisis fell just out of coverage and ended up costing them everything short of an internet connection to complain through.

But, despite the costs, risks and likely betrayals, you’re going to need insurance for some things. Maybe your state requires drivers to have auto insurance, or your mortgage mandates your home be covered for the balance of your loan. Your going to have to pony up, and that means you might end up as one of those poor commentators spilling bile online.

The Cold Heart Of The Insurance Industry

Still, there are things you can do to better understand your policy. Reading through it thoroughly and taking notes is a good first step. While you may need some translation or clarification, the specifics of what your policy covers is in there.

However, what’s less straightforward and often goes unconsidered is an insurance policy’s aggregate limit. The aggregate limit is a hard cap on how much the insurance company will pay out over a given period before your policy is either spent or dropped entirely. The amounts and timeframes that represent an aggregate limit will vary from policy to policy, and that variation will generally be seen in your monthly payments. Obviously higher claim limits (individual or aggregate) means higher premiums.

These figures are the core of how the insurance industry functions, and understanding how your needs will fit into that schema is essential in squeezing the most out of your coverage and avoiding unexpected and unfair lapses. If you’re at the point of shopping around for policies, this is one place to start thinking about your coverage needs and ways to optimize your insurance to be there when you need it.

When To Act Up And When To Shut Up

One way of bypassing some costs and risks is to identify a ceiling, a dollar amount below which you’ll cover any costs yourself. While it’s not ideal—paying for both insurance and repairs that would otherwise be covered by it—determining a reasonable ceiling can help you avoid reaching your policy limit and getting the boot.

By covering the small stuff, you will have leeway that ensures your insurer will pay up for more dire repairs. This is especially handy in the case of two or three large claims occurring in a short span.

Determining how much is too much is up to you. However, a good resource for gauging when you know you’ll need the insurance company to step in is by gauging typical claim amounts. The Insurance Information Institute is a great resource for the average homeowner and auto insurance claim figures between 2011-2015.

Beyond that, doing research on which provider has the best record with homeowners coverage or the best value for auto insurance

As with insurance in general, the hope is to ultimately never need to rely on these figures for any potential tragedy. However, understanding these limits and will help you optimally manage those times when you do need your insurer foot the bill on auto or home repair could help.