Dealing with insurance providers can be a frustrating and often scary process. They are bureaucracies and employ people to overwhelm clients with paperwork. On the other hand, people who need to seek assistance from their insurance company are usually at a point in their life when things are falling apart – their car was totaled, or their roof caved in, or their basement is flooding.
One way, theoretically, to minimize frustration when things go wrong is to do a proper vetting of an insurance company before you commit to their policy. However, you should remember that insurance companies vet you more than you research them.
Here are three things your insurance company doesn’t want you to know about them:
1. Your credit score plays a big role in your insurance quote
Insurance companies will look at your credit score and history when giving you a quote on insurance. A study by the Federal Trade Commission (FTC) concluded that credit score is an effective predictor of risk, and that having a lower credit score correlated with increased chances for filing a claim under an insurance policy.
The FTC did not have data showing that filing insurance claims caused lower credit scores, or vice versa. However, it did provide a number of theories for the relationship. For example, consumers who are prudent in financial matters may be more cautious and take more care when it comes to driving or making home repairs, or engaging in general home maintenance. The FTC also presented the theory that people who take risks in one area of their lives, such as financial risks, may also take risks in other areas of their lives, such as engaging in riskier driving.
A spotty credit history may also indicate that you won’t pay bills to the insurance provider down the line. The practice of examining credit score before providing an insurance quote could be discriminatory to people with lower incomes who may not have the available funds to build up a solid credit history. As a result, some states, including California, have banned insurance companies from looking at your credit score when providing quotes.
2. Your personal life matters
Insurance companies deal in risk. They have seemingly infinite studies on relative risk about every aspect of someone’s life that show how much risk that person poses.
Insurance companies will take information about your personal life into account when offering you a quote. If you smoke, your premiums will go up for your home, health, and auto insurance policies. Your occupation can, and does, affect the amount of money you’ll pay for your car insurance premiums. Higher stress positions, such as doctors, lawyers, and real estate brokers, may pay more for the same policy than someone with a lower stress job, like teachers, who have statistically better driving records than individuals in other professions.
Insurance companies will even take your gender, age, and marital status into account. Married people are likely to pay a significant lower amount for premiums than single people of the same age and gender. Teenagers will pay the highest rates, because teenagers statistically file the most claims and get into the largest number of accidents.
3. Insurance companies are for-profit businesses
This may seem obvious, but the logical outcome is that insurance companies are designed to make money. If they give you money, they have less money in their pocket. Because they are designed to make money, they may make a quick settlement offer immediately after a natural disaster or car accident, expecting victims to take the quick money. It can be tempting to take a quick payout, especially as medical expenses start to add up. Claims adjusters will try to convince you to settle quick and move on with your life. However, if you accept a quick payout, you’ll have to sign away your right to bring any additional claims stemming from the accident.
This means that you will be on the hook for future medical bills stemming from injuries not apparent immediately after the injury. You may also have lost wages or additional pain and suffering that otherwise could have been compensated.
Insurance adjusters may even get bonuses for denying your claim or getting you to settle for a lower amount than you’ve been authorized to receive. If you think your insurance company is playing games with you, consider contacting a personal injury attorney to help you get the best settlement possible.
This article does not provide legal advice, nor does it form an attorney client relationship. If you or a loved one is in need of assistance when negotiating with an insurance company, contact Petersen Johnson online or call us at 602-396-4635 for a free consultation.