Insurance Myths and Facts About Reporting Claims: Part 2

Sir Isaac Newton once said, “For every action, there is an equal and opposite reaction.” Newton’s third law of motion speaks to physics, of course. But it applies to lots of other factors in life. Insurance myths and facts, like forces of nature, come in pairs. For every insurance myth about reporting claims, there’s a counterbalancing insurance fact ready to clear the air.

Last month, we launched our two-part series of dispelling insurance myths about reporting claims. Now, we debunk two more common insurance myths: 

• Myth #2: Reporting claims will raise your premium every time.
• Myth #3: Insurance providers are quick to settle.

First, let’s recap what we covered in Part 1: the common insurance myth that inspectors only need to report “big” claims. 

Dispelling More Insurance Claims Reporting Myths

Myth #1: You only have to report the “big” stuff.

It’s tempting to resolve a claim or complaint by yourself. Maybe it’ll go away on its own. Or you might think you can talk your client down and get the claim to disappear without ever telling your insurance company.

But this is a bad strategy. Not only do claims rarely disappear by themselves; they also escalate fast. And if you try to stomp it out solo, you risk compromising your defense and insurance coverage.

Indeed, looping in your insurance at the first sign of conflict helps ensure efficient claims handling and a smooth claims resolution. Why else does insurance often provide peace of mind in a dispute? Read Part 1 to learn more.

Myth #2: Reporting claims will raise your premium every time.

Here’s another insurance myth that stops inspectors from reporting insurance claims promptly (or at all). They believe every reported incident translates to increased premiums. They see this as a very black and white issue: claim = higher premium.

There are lots of myths about insurance premium increases. Yes, inspectors with minimal or no claims history can expect a lower premium than someone with multiple, expensive claims. If you have an extensive claims history or you do more inspections than others, insurers will say you’re more likely to get a claim. It’s called having higher “exposure.” 

Luckily, there are more pieces to this puzzle than meets the eye. Here’s another truth about insurance premium changes. Oftentimes, if your defense team can close the claim for less or equal to your deductible, that claim will have no consideration for your insurance’s underwriting. It may not affect your loss run or your future insurability.

Furthermore, insurance myths about premium increases rarely acknowledge that even a pricier claim has its nuances. While every insurer operates their underwriting a little differently, at InspectorPro, we also look at non-expense factors such as:

• If you were at fault.
• If you were cooperative with the claims team. (After all, a more cooperative team makes for a more timely resolution of issues.)
• If you use a pre-inspection agreement with our recommended provisions.

Likewise, if you report the incident soon enough, before there’s a written demand for money, our pre-claims assistance team might shut it down before it becomes a claim. This means no premium increase and no deductible payment. It’s one of the many ways of saving money through early reporting—and a free service to avoid claims entirely.

The Flip-Side

However, if you’re either late reporting an insurance claim or you neglect to inform your insurance altogether, you could face the opposite consequences: for the claim, your deductible, and your premium rate. We discuss these under “Failing to report claims puts your future coverage at risk” in Part 1.

Myth #3: Insurance providers are quick to settle.

The other insurance myth we hear often is there’s no point in reporting claims, because insurance companies don’t want to defend you. They don’t have inspectors’ best interests at heart. They’re eager to settle so they can get your deductible.

We know our industry has a bad rap. Our claims team has personally spoken with inspectors who have these concerns. Many have either had a bad experience with another insurance company, or they’re extra cautious because of other inspectors’ horror stories. 

Here’s how we explain it to them.

It all comes down to specialty.

In our experience, these insurance myths play out more frequently with less specialized insurers who aren’t invested in your field (and, therefore, are less committed to your fight).

While we can’t speak for other insurers, the InspectorPro team is committed to the home inspection community. We understand the subtleties that make your claims, clients, regulations, and standards of practice unique from any other profession. Because we work exclusively with home inspectors, we have specific strategies in place for understanding your clients’ complaints and addressing them quickly and cost effectively—not for the claimant, but for you. 

One such strategy: InspectorPro’s state-specific pre-inspection agreements. After more than 15 years of studying the insurance facts about efficient claims handling, we know a weak agreement is like wearing paper-thin armor into battle. It gives the opposing attorney something to exploit and leaves you vulnerable to sticky, drawn-out conflicts.

InspectorPro’s agreements, by contrast, include top-performing provisions proven to reduce your claimant’s leverage in court. They’re crafted with the kind of specialized, fortified defense that turns tides drastically in your favor. We’ve designed them to prevent settlements whenever possible—or, in many cases, smother a conflict before it turns into a claim. 

Already insured with us? Learn how to get your InspectorPro agreement here.

Sometimes, saving inspectors money does mean settling.

Additionally, it’s important to know that settling isn’t always bad. In some cases, it’s the best option for closing claims without high out-of-pocket expenses.

In 2019, we shared Randy Sipe’s account of a meritless claim he faced after 20 years of claims-free inspecting. He’d performed a stellar inspection, used a solid pre-inspection agreement, and had no liability. The insurance facts suggest it would be an easy solution.

But Sipe quickly discovered that, ultimately, these claims have less to do with who’s right and who’s wrong. The biggest determining factor: the cost to defend. After analyzing the costs of defending the claim, his team decided to settle. In the end, contrary to many common myths about insurance premiums and claims resolutions, settling saved him money, time, and stress, while also protecting his future insurability.

“At the end of the day, I know that I was in the right. The claim was meritless. However, its frivolity doesn’t matter. What matters is that it happened, and it didn’t end my business. I could have tried to defend it on my own and spent thousands. But instead, I let my E&O carrier take care of it. I am glad I had someone else to pay the bill,” Sipe shared. “A win isn’t a win if it costs more to defend than to settle.”

Furthermore, when our claims team does settle, we always strive to keep the inspector’s costs less than their deductible. When inspectors face higher demands, settling insurance claims can mitigate your risk of a significantly higher payout—not to mention a long, drawn-out process that’s stressful for all parties, including you and your client.

To learn more about what goes into reporting, resolving, and settling home inspection claims, read our article.

Our top insurance fact? Peace of mind is the best benefit.

We’ve reviewed several insurance myths and facts about the importance of early claims and complaints reporting. It facilitates better investigations, faster, smoother solutions, fewer costs for home inspectors, and no late insurance claim reporting penalties. For inspectors like Richard Stockton of A Better Home Inspection Service LLC in Virginia, this all comes down to peace of mind.

When an incident arises, every inspector should have a trusted provider who will take conflicts off your hands and give you the best fighting chance. Even if nothing comes of a conflict, insurance gives peace of mind that expert eyes are watching out for you, Stockton said.

“You never know what could happen. Having the insurance and having the peace of mind that [you can] let them know what’s going on and they [can] say, ‘Hey, don’t worry, everything is looking good.’ Or, ‘Yeah, you’ve got some problems here, but I think we can work with something going on here.’ At least we know we’re prepared,” he said. 

“That’s what they’re here for. Talking with [my] insurance company helped me a lot. It eased my mind from going on the warpath and doing stuff that I don’t really need to do. … [And] at least they know what’s coming. Hopefully it doesn’t come, but they’re prepared for it,” Stockton said. “I wholeheartedly recommend that all home inspectors get at least a minimum amount of insurance coverage … and have a good working relationship with them, too.”

At InspectorPro, your peace of mind is our top priority. We aim to prove wrong the insurance myths (and anxieties) about reporting inspection conflicts. Our personalized customer service, accessible pre-claims assistance, and risk management resources put inspectors on the fast track to successful conflict mitigation. Fill out a free, no-obligation app here to get in touch.

Related Posts

• 7 Common Questions About the Processing of Insurance Claims and Their Answers
• Does carrying home inspector insurance make me a target?
• What To Expect if You Get an E&O Claim