The second thing you never knew about insurance:

2. Your agent might discourage you from filing a claim because it keeps his or her loss-ratio down.

The insurance company your agent sells for is tracking your agent’s loss-ratio. The “loss-ratio” is a fancy term for the amount of money paid out in claims to his or her customers divided by the amount of money in premiums that comes in from those customers. Your agent gets a bonus in part based on how big his or her loss ratio is. So, your agent has an incentive to discourage you from filing a claim even when he knows you should.

Here’s an honest agent’s advice: an intelligent insurance customer makes claims for liability (money they owe for damages caused to others) and for catastrophic losses (losses bigger than they can afford) in every single case. That’s what insurance is for. An unintelligent insurance customer makes claims for little things like windshield replacements and fender benders. Those are the sorts of claims that you as a customer will end up paying more for, in the long run, in higher premiums. If your agent tells you this, he or she is telling you the truth. But if your agent tries to get you to avoid making a claim for liability or a catastrophic loss, you should ask if he or she has your best interests in mind.

Read on for the 3rd thing you never knew about insurance.

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