A home is a major investment, and home insurance is designed to protect it. We pay premiums in exchange for coverage, so the natural inclination is to file a claim when a covered loss occurs. The reality is not so clear cut. Filing a claim under the wrong circumstances can affect your premiums and your finances adversely in the future. It is important to know when to file a homeowners insurance claim, and when not to.
What Are the Reasons Not to File a Homeowners Insurance Claim?
Homeowners insurance companies keep, and share with other insurers, a record of all the claims you have filed for up to seven years. If you file one too many claims, you may be considered high risk and the insurance company may cancel your policy. Even if your policy is not canceled, you can expect to see an increase in your premiums after filing a claim. In some states, a single home insurance claim can increase your premiums by 20% annually. In most cases, it is more cost-effective to pay for smaller covered losses out of your own pocket.
When Should You File a Claim on Your Home Insurance?
Homeowners insurance is designed to protect you from loss, and there are cases when it makes sense financially to file. If your home is so severely damaged from an unexpected, covered disaster that it is uninhabitable, that is the time to file a claim. You may also consider filing if the cost to repair the damage to your home far exceeds your deductible. There is less risk of having your policy canceled if you have not filed a claim within the past three years.
When Should You Not File a Homeowners Insurance Claim?
Every claim you file goes on your long-term record, whether or not the insurance company pays out. If the cost of repairs is less than or only slightly greater 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 cost of repairs is considerably greater than your deductible, you should be certain the damage is covered under your policy before you file a claim. The insurance company is not likely to cover it if there was something you could have done in terms of regular maintenance to prevent the damage. For example, if your roof was in need of repairs and collapsed after a heavy snowfall, your insurer is likely to deny your claim for a new roof.
If you have filed a claim within the past three years, whether or not it was denied, you should think carefully before filing another claim. If you do so, you run the risk of having your policy canceled or non-renewed and not being able to obtain coverage elsewhere easily. If you are unsure about whether to file a home insurance claim, our friendly agent can help.