A home is a great investment, and a home insurance policy is designed to protect it. We pay premiums in exchange for coverage, so the natural tendency is to apply when a covered loss occurs. The reality is not so clear. Claiming in the wrong circumstances can adversely affect your premiums and your finances in the future. It is important to know when to apply for a homeowner and when not.
What are the reasons for not filing a homeowner's insurance claim?
Homeowners insurance companies keep and share with other insurers, a record of all claims you have submitted for up to seven years. If you submit one too many claims, you can be considered a high risk and the insurance company can cancel your insurance. Even if your insurance is not canceled, you can expect an increase in your premiums after you have submitted a claim. In some states, a single home insurance application can increase your premiums by 20% per year. In most cases, it is more cost effective to pay for less covered losses out of your own pocket.
Homeowners' insurance is designed to protect you from loss, and there are cases where it makes financial sense to file. If your home is so badly damaged by an unexpected, covered disaster that it is uninhabitable, it's time to claim. You can also consider reporting if the cost of repairing the damage to your home exceeds your deductible. There is less risk of your insurance being canceled if you have not submitted a claim in the last three years.
When should you not file a homeowner's insurance claim?
Every claim you submit is registered in your long-term register whether the insurance company pays out or not. If the cost of repairs is less than or just slightly higher than your deductible, it may make more sense to simply pay out of pocket to cover the damage. It is not wise to involve your insurance company in minor repairs.
Even if the repair costs are significantly higher than your deductible, you should be sure that the damage is covered by your insurance before you make a claim. The insurance company will probably not cover it if there was anything you could have done in the form of regular maintenance to prevent the damage. For example, if your roof was in need of repairs and collapsed after a heavy snowfall, your insurance company will likely deny your claim for a new roof.
If you have filed a claim in the last three years, whether it was denied or not, you should think carefully before submitting a new claim. If you do, you risk that your insurance will be canceled or renewed and that you will not easily be able to get coverage elsewhere. If you are unsure whether to file a home insurance claim, our friendly agent can help.