Home insurance is meant to protect a home from major catastrophes. While home repairs can be costly, in most cases, homeowners should do some math and determine if filing a claim is worthwhile for anything less than complete destruction. Knowing when to file a homeowners insurance claim can help you keep your homeowners insurance rates in check and keep you and your home eligible for homeowners insurance coverage.
Hopefully, you'll have thought through when to file a homeowners insurance claim before an emergency hits. Determining what types of damage are worth filing a claim over can keep you from unnecessarily filing a claim and wasting money and time (and possibly increasing your insurance rates later!). When you purchase a homeowners insurance policy, work with your insurance agent to better understand the situations and scenarios where making a homeowners insurance claim makes sense and the scenarios where you are better off not filing a homeowners insurance claim.
When to File a Homeowners Insurance Claim
Know Your Homeowners Insurance Deductible
A deductible, if you’re not familiar with the term, is the amount you pay out of pocket when filing a claim before your coverage begins. It’s in addition to the premium you pay for coverage. For example, $1,000 is the amount that large insurers typically require for a deductible. For a $10,000 roof repair, for example, you’d pay the deductible and the insurer would pay $9,000.
"It’s important to pick a deductible that you'd be comfortable paying in the event of a covered loss," says Seth Miller, InsuraMatch insurance advisor. "Let’s say you have a $1,000 deductible on your home insurance policy and a tree falls on the roof of your home, causing $1,300 worth of damage. After paying your $1,000 deductible, the claim would amount to a $300 payout. Most people would opt to pay for this loss themselves. There are a few reasons for this, but the most common is that filing a claim can impact your future homeowners insurance rates."
He adds, "If you’re the kind of person that buys home insurance to protect against large losses, like a fire, you’re probably okay with a larger deductible, but it still needs to be a dollar amount that you could come up with in the event of a large loss."
The bottom line? Choose a deductible that makes sense for your budget and if you need to file a claim, carefully weigh whether it makes sense compared to your deductible.
Learn more by reading Should I Have a $1,000 Deductible on My Homeowners Insurance?
Will My Homeowners Insurance Go Up if I File a Claim?
"Filing a claim can negatively impact the future cost of your insurance and, if you file many claims, they can even impact your eligibility to purchase a home insurance policy with certain carriers," advises Seth. "One loss is generally accepted and overlooked by most carriers, but homeowners that file 3+ claims in a 5-year period will generally have a more difficult time finding a carrier willing to insure their home in the private market."
If you file a number of claims in a year, or file large claims, your insurer may “nonrenew” your policy because you’re more of a risk. Before filing a claim, ask your insurance agent if it’s worth doing in the long run and get an idea of how it would affect your policy and rates. Having your insurance rates increased after filing a few claims can be better than not being renewed. Getting a new insurance carrier may be difficult if you’re dropped by your current insurer, and you may end up with inferior coverage at a higher cost for a few years with a new carrier, Shaffer says.
Along with raising rates, insurance companies can limit coverage after certain types of damages are claimed, according to Zacks Investment Research. Claims that could increase a premium include water damage, dog bites or falls. Claims that are unlikely to result in higher rates include weather-related problems or other catastrophes.
Every family has its own financial breaking point, but filing small claims for $1,000 over your deductible can be a poor decision. Less than that, and you should pay for the repairs yourself. For some people, $5,000 may be a better threshold.
Even if you’re trying to get a new insurance policy with a different insurer, don’t expect insurance companies to not know about past claims you file. Most insurance companies will look through a database of every claim ever filed by you through the Comprehensive Loss Underwriting Exchange, or CLUE. It will include the date and type of the loss, and the amount of the insurance settlement. Personal property claims information generally stays on a CLUE report for five years after a loss is reported. Your insurer, however, will have a record of claims you’ve made with it for as long as you’ve been a policyholder with it. Insurance claims made by previous owners of a home count against you if they haven’t been remedied.
How to Make a Claim on Homeowners Insurance
If you do decide to file an insurance claim, be sure to follow a few steps that the Insurance Information Institute recommends:
- Report a crime to police. If your home has been burglarized or vandalized, report it to police. A police report can help your insurer.
- Call. Call your insurance company and ask for help on filing a claim and if it will exceed your deductible.
- Fill out forms promptly. Your insurance company will send you claims forms to fill out. Return them as quickly as you can and make sure they’re filled out completely.
- Get an inspection. An insurance adjuster will inspect your home and property damage to determine how much it will pay for the loss.
- Make temporary repairs. After photographing or videotaping the damage, protect your property from further damage and don’t throw out damaged items until the adjustor has inspected your home.
- List damaged articles. Make a list of destroyed or damaged items, then make a copy for your adjuster. Provide receipts for these items if you have them.
- Keep receipts. If you have to move out of your home during repairs, keep receipts and records of additional expenses.
Get expert advice on your deductible and compare homeowners insurance quotes with one of our advisors today at (844) 522-0543.
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