Should You Inform Insurance Agent about a Burglary?

You may have heard this advice from your insurance agent: “If you ever have a burglary or your property is vandalized, please report this to me at once.”

But is this always good advice?

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Southern California longtime reader “Anne” had that very question for me several hours after she “was jolted awake at 3:30 in the morning by a phone call from M&S Security advising that the alarm had gone off at my office.”

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After inspecting the office with their patrol officer, it was clear that nothing had been taken or disturbed, with the exception of the damage caused as the would-be burglar tried to get inside:

The front door safety glass had been shattered in a failed effort to gain entrance.
Screens were removed from windows.
A French door had been kicked open, which set off the alarm, sending him running and causing minor damage to the door frame and lock.

“It was property damage only — vandalism — and I immediately made a police report. Should I also inform my insurance agent?” she asked.

To notify or not to notify your insurance agent, that is the question, and it can have potentially significant consequences. I’ll have the answer in a moment, but for now, let’s assume the burglar was successful and things were stolen of considerable value, which will be listed in an insurance claim.

Prepare for a Loss Before it Occurs

I spoke with Chula Vista, Calif., State Farm Insurance agent Bernardo Vasquez, who is in a unique position when claims of this nature are made. While now an agent who sells insurance — and loves being his own boss — he explains that “My first 18 years were as an investigator, working all facets of claims, auto, fire, commercial, litigation and catastrophes.”

Vasquez points out that claims are paid, “based on proving what was there, what was lost. That is the greatest challenge a business or homeowner will face in what is an enormously stressful time. So, to minimize the emotional impact and be sure that you are able to list everything that was lost, be prepared before the event occurs.”

And how can you prepare for that potential loss?

“As no one can remember everything, by having an inventory of what you owned, what was in the office or home — before it is needed — this helps to assure that your claim will be correctly paid and will reduce the mental strain, which is often significant.”

He explained that your inventory can be in digital or paper form, but it should be kept off-premises. Use your cellphone to video and photograph the contents in your home or office.

“Keep your sales receipts, and credit card statements, which show the purchase, and owner manuals. These things are so valuable — especially 20 or 30 years down the road — and it is a good idea to take photographs of these items with family or employees in the photos to establish authenticity. Show serial numbers of expensive items, like electronics and appliances, as well as their replacement cost.”

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Red Flags in the Claims Process

I can’t count the times when clients who had a fire or were burglarized felt they had won the Insurance Lottery, with visions of free money falling from the skies. Informed that padding the claim exposed them to felony prosecution, and that claims adjusters were anything but naïve, usually was a good wake-up call.

Some chose to ignore my warning, clearly having been standing behind the door when brains were handed out, and expected my office to become their co-conspirator to insurance fraud. They quickly became ex-clients.

“Our ears really perk up when there are significant inconsistencies, such as things that do not seem to make sense, or something that does not match what was stated in a police report,” Vasquez underscores.

Of the many great points he left with me, one stands out:

“It would be foolish to file a claim that is less than your deductible, and not a good idea where the loss is fairly minimal or the cost to repair damage doesn’t amount to much. Claims can result in a premium increase, and you’ve got to consider that. For major losses, of course, that’s why you have insurance.”

Why You Might Not Even Want to Talk With Your Agent

Finally, let’s get back to our reader’s question: Should she tell her insurance agent she’s had a break-in? Well, since the damages were minor and our reader, Anne, isn’t planning on making a claim, then she should probably keep mum, says one insurance agent I spoke with off the record.

“Just remember that I work for the company,” the Albuquerque, N.M., insurance agent said. “Many agents will inform the carrier of your loss even if you do not file a claim, and your rates will likely be raised! If it is relatively minor, and something you can easily handle out of your own pocket, do not ever notify your agent.”

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Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, You and the Law. Through his column, he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."