You pay for homeowners insurance to protect yourself if something happens to your property. But there are times when you'd be better off paying for repairs out of your own pocket rather than filing a claim.
This article will cover the above in detail, as well as:
When you shouldn't file a home insurance claim
There are several situations where it's in your best interest to avoid filing a home insurance claim.
The repair or replacement cost is close to your deductible
If the cost to repair the damage is less than or close to your deductible, you should pay for the repairs yourself instead of facing a potential increase in your premium.
For example, if you have a $1,000 deductible and someone breaks into your house and takes your personal belongings, which are worth $1,500 total, then filing a claim may not be worth it. If you're paying $1,200 per year for home insurance and your premium rises by 10% after your first claim, you would be paying an extra $120 per year for five to seven years since claims can stay on your record for that amount of time. This would amount to an extra $600 to $840 total after five to seven years. In this scenario, the claim would end up costing you more than paying out of pocket. If the repair cost is a few hundred dollars higher than your deductible, paying for the repairs yourself may be the best option.
When you file a claim, it's noted in the Comprehensive Loss Underwriting Exchange, or CLUE. Nearly all carriers check this database before deciding whether to insure you and how much to charge you. That's because a CLUE report includes information about all of the claims a person has made in the last seven years.
As a rule of thumb, if your claim is under $3,000 or under $10,000 for water damage, it may not be worth reporting. Insurance companies may not renew your policy if there are concerns about mold from the water damage. If the cost of repair is too high for you to handle on your own, that's when you should file a claim.
Multiple home insurance claims within the last three years
It's important to evaluate whether or not it's the right time or situation to file a claim. Filing claims on any sort of regular basis will likely provoke a negative reaction from your insurer. Filing too many claims also makes you look riskier from your insurer's vantage point. If you file multiple claims, you may be at risk of having your policy not renewed when your policy is up for renewal.
Your homeowners insurance claim is related to a maintenance issue
Don't put off repairing your damaged roof, replacing your rotting fence or neglecting any other part of your house that needs maintenance. If your property is damaged due in part to your lack of maintenance, there's a good chance your claim will be denied. Maintenance issues can include a leaky roof, plumbing issues and termite damage.
Maintaining your home also helps you avoid filing frivolous insurance claims, and it positively impacts your premium. Well-maintained houses are often cheaper to insure than those that aren't.
The claim is tied to an event your policy or insurance company doesn't cover
You don't want to file a claim for something your insurer won't cover. Your insurance provider will deny your claim, and the claim will still be added to your CLUE report. It's important to review your policy to find out what your insurance policy covers.
Consequences of filing unnecessary or multiple claims
You can file homeowners insurance claims whenever you want, but doing so can lead to problems. The consequences of filing unnecessary or multiple claims include:
- Rising premiums.
- Policy nonrenewal.
- Difficulty finding coverage from other companies.
Even a single minor claim has the potential to increase your premium. Filing multiple claims within a few years could increase your home insurance costs substantially. If you make similar claims, like two water damage claims, your insurer may think your home has bigger issues or there is a persistent problem.
The more claims you file, the more you present yourself as a risk to your insurer. You can avoid filing claims by fixing up the damage yourself, performing routine inspections and paying for small repairs out of pocket.
Finding out if your home insurance claim is covered
You can review your policy or get expert insurance advice to find out if your home insurance company will or won't cover a claim.
Research your policy
Reading through your policy is a good place to start. When you do so, pay attention to the section that covers "exclusions." This is where you'll find information related to what your policy doesn't cover. The "declarations" section provides information about your policy's coverage limits, and is also beneficial to look over.
Get expert insurance advice
If you're still unsure whether your insurer will cover your claim, ask a contractor, a private adjuster or your agent.
If you are unsure if certain damages are covered, you can call your agent and ask them questions about your policy. However, when asking an agent questions, you'll want to be clear that you're calling just to ask a question and not to report a claim.
If you're unsure about filing a claim, you can contact a contactor to get an estimate of the repairs needed.
When to file a home insurance claim
There are also situations when you do want to file a homeowners insurance claim.
Cost of repairs is too high to handle
If the cost to repair the damage to your home is well above your deductible, then you should consider filing a claim. For example, fire can cause significant damage to your home. In this case, a home insurance claim may be worth filing depending on the cost to repair the damage.
It's your first claim
The number of claims you've submitted for your home can affect how much you pay for home insurance. If you haven't filed a claim in the last few years and the damage to your home is significant, then filing a claim may be your best option. Since filing too many claims makes you look like a liability and can lead to your policy being not renewed or a premium increase, it's important to consider all your options before filing a claim.
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