Filing an Insurance Claim vs. Settling Know When to Hold 'Em

Sometimes bad things happen to good buildings. It's just a fact of life. And sometimes, bad things happen to good buildings with an unforeseeable and unavoidable frequency. That is also a fact of life. Usually, when those bad things happen, the building's insurance carrier is there to step in and make things right.

That may not be the case, however, if a building has filed too many claims. Large or small, it does not matter what the particulars of the situation are. If a building has filed more than the average number of claims and is seen as a risk by the insurer, then premiums most certainly will rise and coverage ultimately may be lost.

One way that some buildings avoid doing that is to pay for and take care of smaller problems themselves, shouldering the burden for repairs without ever involving their insurance carriers. While that approach may require a bit of unexpected, out-of-pocket expense for the building, some feel that in the long run, it could help save money by keeping premiums low and avoiding the stress that comes from trying to find a new insurance carrier if they've been labeled risky.

Driving up Costs

As with any economic entity, with insurance premiums there can be a number of causes behind an increase in price. An insurer may decide that the building is actually worth more than they originally thought and can increase the premiums to match that newly assessed worth, says Frank Delucia of the Manhattan office of HUB International Northeast. "Sometimes it takes a while to get to know a building."

Sometimes a premium increase can be the result of external forces over which a building's management has no control. "Insurance companies base a lot of their premiums on what goes on in the stock market," Delucia says. When the market is doing well, the company may be able to invest premiums and garner profit that way. This gives companies more flexibility in establishing their rates, meaning that one carrier may say they will insure a building for $150,000 a year, but because the market is good and profits are stable, the carrier down the street may tell that building that they can insure it for $100,000. That is what is known as a "soft" market. Insurance companies make their money, however, when a hard market takes hold and the flexibility among the various companies disappears. Clients are unable to go to a different carrier to get a significantly lower rate because all of the companies are making their money on premiums and not from other sources.

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