When to talk to insurance agent about large unexpected expense?

[Rebecca E.]

We are new to REI. We have 7 doors and haven't had any big unforseen expenses until this week. This week we had a sewer problem with a lateral. It's not directly our problem but the city is going to make us replace the lateral because it's not up to code any longer. I'm simplifying, so don't get stuck on details. The costs are estimated at 5k. Our deductible is at 1k.

the question is: do we report it to the insurance and try to get them to cover it? Do we pay cash out of pocket so we don't have an increase in fees going forward? Is there a way to predict how much our insurance will go up after a claim? 

Any suggestions would be welcomed!

[Greg Scott]

I've made a half dozen claims.  At least on SF, I've never seen a significant premium bump after a claim.  The commercial policies are a different story.

On the other hand, this sort of issue may not be the kind of thing that is covered.  When something "wears out", insurance usually won't cover that.  They cover sudden events, like if the sewer line backed up and inundated your building.  I'd call your agent first, but I don't see much risk from making a claim, even if it is denied.

[Greg M.]

First thing you need to do is determine is if it is covered. Sounds like there is no sudden damage to your property, but it needs to be replaced due to being old and not up to code. Insurance probably will not cover this. Lots of things are not up to code and need to be replaced. That's a cost of ownership, not an insurance claim. However, bringing it to their attention, they can force you to upgrade it to code or exclude it from your policy. 

It may be, but I suspect that you will find out it is not covered.

Assuming it is covered, how much will your rates rise? Impossible to say, but worst case is that they rise on all 7 properties and stay raised for 5+ years. And yes, they can rise on all 7 properties even if those properties have different insurance companies. 

I have deductibles as high as 10K and probably wouldn't file a claim under $20K, as I'm a big believer that insurance is for catastrophic events, not "that sucks" events. 

[Nathan Gesner]

Quote from @Rebecca E.:

I agree with Greg. This doesn't sound like something insurance would cover. I would talk to your insurer and see if it's a covered event. If it is, find out if it will affect your premiums going forward, then make an educated decision.

[Francine Melia]

I also concur with Greg: the first important step is to read your policy and determine what perils are included and excluded. Without seeing your specific policy, we can't know whether or not this situation is covered, but I can say that normal aging/wear and tear is excluded from many policies. You can also reach out to your insurance agent or broker to go over the details of the policy and coverages if you need help with the document.

With regard to your insurance carrier, if you reach out to them about a potential claim/for an inquiry, many record that as a claim even if the actual claim is never filed. This can raise the rates on this property as well as any other properties connected to your named insured/property ownership and the claim can stay on your history for 3-5 years or even longer (depending on which carrier is running your claims history as they can use different time measures). There is no general formula for how much the premium rates may rise, but it's common to see that increase as well as any year-over-year increases that happen regularly.

Once you know more about the coverages and exclusions in your policy, it's up to you to decide if you think it's a claim you'd like to make vs paying for it out-of-pocket. Some factors I recommend taking into account are: your deductible vs the projected cost of repairs, your time spent filing the claim and getting the repair and reimbursement if it is covered by your policy, and how much and how likely your rates are to go up if you make the claim.

Best of luck as you navigate this situation.

Francine

[Rebecca E.]

Quote from @Francine Melia:

I also concur with Greg: the first important step is to read your policy and determine what perils are included and excluded. Without seeing your specific policy, we can't know whether or not this situation is covered, but I can say that normal aging/wear and tear is excluded from many policies. You can also reach out to your insurance agent or broker to go over the details of the policy and coverages if you need help with the document.

With regard to your insurance carrier, if you reach out to them about a potential claim/for an inquiry, many record that as a claim even if the actual claim is never filed. This can raise the rates on this property as well as any other properties connected to your named insured/property ownership and the claim can stay on your history for 3-5 years or even longer (depending on which carrier is running your claims history as they can use different time measures). There is no general formula for how much the premium rates may rise, but it's common to see that increase as well as any year-over-year increases that happen regularly.

Once you know more about the coverages and exclusions in your policy, it's up to you to decide if you think it's a claim you'd like to make vs paying for it out-of-pocket. Some factors I recommend taking into account are: your deductible vs the projected cost of repairs, your time spent filing the claim and getting the repair and reimbursement if it is covered by your policy, and how much and how likely your rates are to go up if you make the claim.

Best of luck as you navigate this situation.

Francine

 Thank you.  I had heard some of what you said in the past, which is why i was reluctant to call my agent.  Thanks for confirming for me.  

my update to the situation though is golden!  Apparently the city had some sort of policy which will cover all my expenses related to the damage and I'm only responsible for bringing the lateral up to current code.  PHEW, that's a load off.

[Francine Melia]

That's wonderful, I'm glad to hear the city is able to cover this for you! If you have other questions about insurance or want to chat in general, feel free to DM me. :)

[Bill B.]

In Las Vegas you have to specifically buy sewer line insurance. I don’t know who to call the “low-life” in this situation. But the insurance company pays the city for the right to use the city seal on its advertisements so it looks like it’s directly from the city. 

It’s $250/year but I don’t know if anyone that’s ever had a sewer line break in vegas. (Few tree roots, all plasticO it’s out main water lines that are metal and under pressure, that fail most often.