Homeowners insurance is there for when your property or belongings are damaged or destroyed, but you shouldn't always jump to make a claim. Filing a claim when the payout would be close to your deductible amount could ultimately not be worth the premium increase you'll likely get at renewal time, for example.
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When you shouldn't file a homeowners insurance claim
If the repair cost you're claiming is close to your home insurance policy's deductible amount, you have many claims on your insurance history or the damage isn't covered by your policy, filing a claim won't be in your best interest. Here are some situations when it's best to hold off on filing a homeowners insurance claim.
The claim amount is close to your deductible
If the repair bill for the damage to your home is less than or close to your home insurance policy's deductible amount, it probably won't be beneficial to you in either the short term or the long run to file a claim. If your claim is less than your deductible, it will be cost prohibitive to file. Furthermore, you'll probably see a premium increase tacked on at renewal time.
If the repair costs come in slightly above your deductible amount, the long-term premium increase can still be cost prohibitive. Let's say you have a home insurance policy that costs $1,200 a year, with a $1,000 deductible, and a fallen tree results in $1,500 of roof damage. If you file a claim and it causes a 10% increase to your premium, that adds $120 a year to your home insurance costs.
This can get ugly when you consider that a claim stays on your insurance record, called a Comprehensive Loss Underwriting Exchange (CLUE) report, for five to seven years. Even if the claim only stays on your record for five years, you're looking at paying an additional $600 in premium costs after the claim. Between the deductible and the premium increase, you wind up paying more than if you had paid for the damage out of pocket.
We recommend that if your claim is under $3,000, or under $10,000 for water damage, you shouldn't file a claim unless your immediate finances give you no choice. With water damage, you may risk your home insurance company not renewing your policy out of concern for potential mold damage.
You've filed multiple claims in the last three years
If you've filed several home insurance claims in a short period of time, it could result in a negative reaction from your provider. According to the Insurance Information Institute, one in 20 homeowners files a home insurance claim every year. If you're above that average, your insurer may consider you high risk. This can result in higher premiums, at the very least, and possibly being dropped by your insurer at your renewal time.
The damage is non-accidental
If you're filing a claim for damage to your roof caused by neglect, or another part of the house that hasn't been properly maintained, in all likelihood your claim will be denied. Home insurance expressly covers sudden and accidental damage to your home. If the damage is caused by neglect, the insurer considers that the homeowner's responsibility.
You file a claim for an uncovered peril
Home insurance policies only cover specific perils. Home insurers offer no wiggle room for coverage on perils not listed in your policy. Not only will the claim be denied, but it will still be listed on your CLUE report and probably result in a premium increase.
When should I file a homeowners insurance claim?
All of the above should not imply that there aren't good reasons to sometimes file a home insurance claim. There are instances, such as personal finances or if you've never filed a claim before, that can make it worthwhile.
Repair costs are beyond your financial means
If the damage due to a covered peril is too high for you to financially handle and is well above your deductible, file a claim. For example, a fire can cause tens of thousands of dollars in damage. Homeowners insurance is made for a time like this.
It's your first claim
If you've never filed a home insurance claim before, your home insurance company will probably still increase your premium, but it shouldn't put you in a high-risk category. Nor should it put you at risk for nonrenewal. That's usually only a concern if you wind up filing multiple claims in a short period of time.
Is my home insurance claim covered?
The simplest, most effective way to make sure your claim will be covered is to read your homeowners insurance policy and consult your agent. This can help you avoid an unnecessary rate increase.
Read your homeowners insurance policy
Your home insurance policy details what it does and does not cover. Pay particular attention to the exclusions section of the policy. It highlights what your home insurance won't cover. For an overview of what your policy covers, look at the declarations page.
Go to a home insurance agent
If you're unclear about what your policy does or doesn't cover, call your agent. That said, if you do, make sure to let them know you're only calling for clarification and not to file a claim.
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