Over the years, I've written in this column about how to save money on your homeowners or auto insurance. Bundling the policies together with the same insurance company often cuts your bill by 15 percent, and raising your deductible from $500 to $1000 can save you up to 25 percent. But there are also ways to keep costs down and make the most of your benefits after you've purchased the policy. For the most part, this has to do with how you navigate the claims process. Here are a few tips so you're prepared next time the unexpected comes along:
Plan in advance. Buying the insurance policy is not enough preparation. When it comes to homeowners insurance, you really should take the time to do a quick inventory of your belongings, says Jeanne Salvatore, senior vice president of public affairs at the Insurance Information Institute (III.org). "You can do it in a number of ways -- buy a notebook and just make lists, use a video camera, take photographs, or use software created for this purpose. You want to document the financial value of your possessions, room by room, so if you need to re-purchase, say, your dishes, you'd know how much that would cost." III offers free downloadable software called Know Your Stuff (available at www.knowyourstuff.org) that allows you to store the information on a remote site, so if your home burns down or is damaged, you'll still be able to access it. Having a detailed list of your items, their condition and estimated value will not only save you time, it'll help you file accurate claims and get the appropriate payout from your insurance company. For car insurance, Salvatore suggests keeping a notebook and disposable camera in your glove compartment so you can take notes and pictures after an accident. You'll want to write down the police officer's information, as well as the other driver's contact information, insurance company, license plate and driver's license number.
Act fast. With both auto and homeowners insurance, it doesn't make sense to delay making a call to initiate your claim. But in the event of a widespread disaster that is covered by your homeowner's policy, like a major storm, this becomes even more important, says Shapiro. "If you have a loss, you want to tell your insurance company as soon as possible. Give them a good indication of the extent of the damage. If you can't live in the house, you're likely entitled to additional living expenses. In most cases, they'll get temporary money to you right away to hold you over." This comes into play if you have to go to a hotel, or you're without clothing and other necessities. If you delay making the claim, your benefit will delayed as well -- particularly if you're behind a long list of people, as is often the case with a natural disaster. You don't want to have to float your expenses on a high-interest credit card.
Err on the side of caution. It's always a good idea to call the police after a car accident, even if you think it's a minor one, so be wary of any driver who tries to talk you out of making the phone call. The worst thing you can do is let the other driver walk away without at least getting their contact and insurance information. And if you cover your bases by calling the police, you'll have a report to back you up if things turn out to be worse than you thought. Just because significant damage isn't visible doesn't mean it's not there, says Amy Danise, senior managing editor of Insure.com. "There could always be hidden damage -- you may see scrapes and a small dent, but you don't know if there's an engine problem, or a cracked axle that doesn't become apparent until it breaks completely a few days later." If you have no way to contact the driver at fault, you'll end up floating the bill yourself, which could mean thousands of dollars out of your pocket or higher insurance premiums down the road. (Note: You've probably heard not to admit fault in a car accident, and that's good advice. Let the police sort through the evidence. What they say will be the final word with insurance companies.)
Don't make any extensive repairs before the insurance adjuster arrives. You paid for this coverage, and you want the insurance adjuster to see the full extent of the damage so you get what you're entitled to. So even if you're handy, try to restrain from starting any major DIY cleanup projects. What you do want to do, though, is take reasonable measures to prevent future damage -- board up broken windows and secure doors to prevent a robbery. "If you make small repairs to prevent future damage, be sure to save all of your receipts to show that you paid out of pocket. It's also a good idea to take pictures of the scene first, so you have evidence of what the damage was like before you began the initial repairs," says Danise. If you don't have a receipt to prove your expenses, you likely won't be reimbursed.
Pay attention to your deductible. In most cases, you'll have to meet that amount for each claim, meaning if the cost of damages is less than your deductible, you're better off paying out of pocket because the amount doesn't carry over from claim to claim. "There's no plus side of reporting anything that isn't more than your deductible, and even if it's a couple hundred dollars over, it may still be worth paying yourself, because it keeps your claims record clean. Paying a small amount over the deductible could end up saving you in premium increases later on," says Danise. This is particularly true, she says, if you've already filed a large claim or a string of claims, although how your claims history affects your premiums varies by state and insurer. "Industry experts point out that some insurers offer very low premiums initially, but then raise rates substantially after a claim." Other ways to keep your claims record clean? Be wary of the towing and roadside assistance services your insurer offers. While they're very inexpensive, using the service could cost you later in premiums because it counts as a claim.
With reporting by Arielle McGowen
Jean Chatzky is the financial editor for NBC's "Today," a contributing editor for More magazine, and a contributor to "The Oprah Winfrey Show." She is the author of six books, including the book The Difference: How Anyone Can Prosper in Even the Toughest Times (Crown, March 10, 2009). To find out more and to read her blog, visit her Web site, www.jeanchatzky.com
