Filing A Claim On Your Business Insurance Can Hurt Your Bottom Line

Filing A Claim On Your Business Insurance Can Hurt Your Bottom Line

When her store, Countryside Gardens, was vandalized last week in Hampton, VA, Tish Llaneza posted photos of the damage on Facebook.

“It is hard to keep going when our small businesses keep getting hit. In our business we have 3 months in the Spring and 3 in the Fall to make the business successful. Thanks to all our faithful customers for sticking with us during times like these,” she wrote in her Post, dated Nov. 2, 2016.


Llaneza says this is second time someone has broken in to her place this couple of years. Just before Mother’s Day 2015, the first break in was caught on camera. The suspect was fully covered to avoid identification. She says that person liked purple, since the clothing and other items stolen were mostly in that hue.

A farmers’ market across the street had three break ins in October.

“What hurts us also is the businesses go into a red area where insurance company’s increase our rates even if we weren’t broken into,” Llaneza says.

Llaneza also says the police recommended against posting on social media.

“But I’m fed up and the city officials need to hear from small businesses,” she says.

Filing A Claim Can Hurt Your Bottom Line

In an article when to file a claim and when to avoid doing so, Arthur Murray of Safeco Insurance, cites six reasons to avoid a claim [the following list is a direct quote from his article]:

  1. The amount needed to address the situation might not exceed the business owner’s deductible—or it might not exceed it by enough to make it worthwhile. It’s a good idea to set deductibles as high as the policyholder can manage. All other things being equal, the lower the deductible, the larger the premium and vice versa.
  2. Filing a claim won’t always cause commercial insurance premiums to increase but it could.That’s true even if the policyholder later determines that the claim isn’t worth pursuing. Over time, premium increases could wipe out any reimbursement you receive from a provider.
  3. A policyholder’s claims history will follow him or her for up to seven years even if he or she switches providers.
  4. Some claims, particularly those that involve water damage, can cause providers to drop policyholders. The reason: water damage can involve mold, which is expensive to repair and can recur.
  5. Filing a business insurance claim can be an arduous process, and there can be expenses involved in documenting the damage, the cause of it and its effects on the company’s finances.
  6. If a maintenance issue is involved in the loss, don’t file the claim. It likely will be rejected.

In fact, Llaneza has seen some fall out from filing a claim before.

“Rates can go up. I filed one claim over 10years ago for Hurricane Isabel,” she says. And her claim followed her in the form of higher rates for years.

She’s now concerned about another hike in rates if the criminal activity in her area continues.

“The local farmers’ market got hit three times last month, and we are having other 7-11 store robbery’s, etc. The recent vandalism could put me in a red district which may end up with me not finding a company to offer coverage or having my deductible raised or a rate increase. These neighborhood burglaries happened within the last 30 days so I don’t know what changes are in store,” Llaneza says.

What Would She Do Differently?

Llaneza has advice for her peers:

  1. Know your deductible (and don’t call your insurance to find out). “I was in an upset and in a hurry that day and thought that was the quickest way to get the deductible amount. That alerts them and you get another check mark even if you don’t file,” she says.
  2. Don’t file a claim if it’s near your deductible. “It ends up being $500 here and there for me. I often thought of collecting the merchandise and filing a claim but that could be years between events.
  3. Be careful about posting to social media. Although Llaneza decided this time she needed to rally her community, she says the police told her to not go on social media about the break-in. It’s a public format and available to insurance companies, too. This time it worked. “It got the mayor to visit the store and other elected officials calling,” she says.