What Is an Experience Letter for Insurance?
One of the biggest mistakes people make with insurance is not getting all the discounts they are entitled to. When an insurance company sets the cost of your insurance or annual premium, they will look at various factors to come up with the price of your policy. An insurance company will use:
- Personal information like the info in your insurability or insurance credit score,
- They will take into account if you've had insurance before and for how long,
- If you had any claims.
Sometimes people make the mistake of saying it is their first insurance because they do not see the value of proving they had insurance before. A Letter of Experience or "Letter of Claims Experience" can help you prove your insurance history when you are looking for new insurance or when you move to a new country. Here are some frequently asked questions about a letter of experience and when it is a good idea to get one to save money on your insurance.
What Is a Letter of Experience for Insurance?
The definition of a Letter of Experience for insurance, also known as an Insurance Experience Letter or Insurance Claims History Letter is a document written by an insurance company that has insured you, stating what your record was with them as an insured. The letter of experience is normally recognized by other insurance companies as a letter of reference to establish your claims experience and how long you have maintained insurance for. This letter of experience is your former insurance company's way of "vouching" for you to new insurance companies who do not know you. Having a letter of experience can provide you with insurance discounts for claims free records, or good driving records in some cases where other methods of verifying your insurance history are not possible.
What Information Is Included in a Letter of Experience?
A letter of experience will usually have the following information:
- Details of what was insured, for example, if you insured a home, it will state the address of the "risk" insured. For car insurance, it may state the vehicle and serial number.
- Who was the named insured? For example, it will list the person whose name was on the insurance policy, which is usually the registered owner of the property or car. In cases where there are several other named insureds, like for example in car insurance with multiple drivers, it may include them as well. If a home policy included additional named insured in special clauses, you may request a letter of experience for them as well.
- The timeline for which the insurance company insured you, so normally it would have an effective date and end date of the insurance.
- Any claims paid during the time of insurance with details of the cause of the claim, and how much was paid. If there were no claims, then it should state "there were no claims paid during the period". If there were claims for various drivers, it should state the info per driver. You may a request a letter of claims experience per person.
- May include information regarding why your policy ended. If it was canceled for nonpayment, or if you owe money for your insurance premiums, this may show up.
Each insurance company has different ways of filling in the information, but in general, the basics are the items listed above.
Who Needs a Letter of Experience?
The most common reason people need a letter of experience is when:
- they are moving to a new country
- have been without insurance for a period of time for a variety of reasons
- need to prove claims on record
- a person was not the primary insured on their former insurance policy (such as kids, college students, roommates, recently separated couples)—they may have been insured elsewhere, just not as a primary.
Why Get an Insurance Experience Letter?
In insurance, first insurance is often risky because no one has any experience with you as an "insured". For example, that's why having renters insurance before you buy your first home insurance can save you money long term.
When you can prove a history of being insured, it shows your claims history and how you've "used" your insurance. Multiple small claims may make the underwriters assess your file differently, and seeing you had no claims will usually entitle you to a discount.
Do All Insurance Companies Require a Letter of Experience?
All insurance companies do not require a letter of experience. If you are not sure, ask your company if a letter of claims experience or insurance history would help. It is common in cases where people are establishing themselves or when people move to a new country where the insurance companies do not have access to American insurance records.
"I Have a Letter of Experience, But It Didn't Do Anything"
Depending on how your insurance company determines pricing, the information in your letter of experience may or may not give you the discount you were expecting. A good example is if you ask for a letter of experience and it shows you have been insured for 18 months in good standing. Sounds good right? Unfortunately, although it will help you get discounts faster, if the insurance company you are insuring yourself with only gives a claims-free discount after 3 years, then you may not get a credit for another year and a half. Learn more here about what makes insurance company prices different and how to find the best one for you.
How to Get a Letter of Experience
Getting a letter of experience is pretty easy. All you need to do to get a letter of experience is to ask your insurance company.
If you haven't been insured for a couple of years, you can still call your last insurance company and ask them to send you one.