Should I File a Home Insurance Claim?

Home Insurance Claim – The answer to that question will go a long way toward determining whether your homeowners insurance will ultimately cost you more or even get canceled.

A very normal dilemma, remembering that you pay for homeowners insurance to protect your home and personal belongings, yet filing a claim when disaster does strike puts you at risk of seeing your annual premiums increase by hundreds of dollars. Worse, either a major claim or too many claims in a given period, no matter how legitimate, could lead to losing your homeowners insurance coverage altogether.

While it can be a fine calculation to make, every time there’s damage to your property or an accident on it, you need to consider carefully whether it makes financial sense to file a claim or absorb the losses yourself. The fates of your homeowners insurance and your bank account hang in the balance. The following should help your thought process in this regard.

Be Mindful of Deductibles, Liability

Most homeowners insurance policies state that any time you suffer damage to your property—whether it’s covered under the policy or not—you’re supposed to make a claim in a timely manner according to most insurance companies. It makes sense to make a claim in a timely manner; however, if you have a small claim for damage to your home or personal property, it is worth assessing the cost to repair or replace the property before filing a claim.

Insurance companies all work closing with a couple of national claims reporting agencies; the instance a claim is filed, it is reported to the claims bureau as an Open claim listing the type of claim and the date of loss.  Upon closure of the claim, the carrier is supposed to once again report the closure of the claim and the amount paid which remains on the bureau records for several years.

It is essential to take a quick review of your policy and figure out what applicable deductible you have for the damage, this is the amount that will be deducted from any payout.  It would make sense not to report a claim if you know that your claim will be less than the deductible amount.   In the case of damage to your home, it would make sense to obtain an estimate of repairs which would help you make the assessment of whether you’d like to file an insurance claim or not.

There may be an exception, if someone is injured on your property, it may be a good idea to file a claim just to be sure that in the event of a personal injury claim against you, your insurance company will have advance knowledge and be ready to defend you whether you are negligent or not.  When not sure, it may be worth asking your attorney or an insurance broker to go over the pros and cons of filing the claim.

Some Claims Are Worth Skipping

Think twice about filing certain claims, even if repair costs exceed deductible levels. Some insurance companies will give notice that they’ll be nonrenewing your policy due to concerns about mold or fear of a reoccurrence of the claim.

A good example would be water damage claims,  if there is a small isolated claim on one side of your home and your plumbing is older and showing signs of wear and tear, it may be advantageous to repair the damage and replumb the home without involving the insurance company.  If you do file a small water damage claim and the insurance company claims representative notices that the cause of the damage was an aged plumbing system, the carrier will likely fix the damage and then send a notice requiring you to replumb the home prior to them offering renewal on the policy.  After all, insurance companies don’t insure the remodeling of old utility systems, they assume that you will maintain the home well and in good working order, the insurance policy is in place in the event of a sudden and unknown cause of loss which is covered by the policy.

May consumers feel that if the insurance company doesn’t pay up to their satisfaction, they will simply switch to a new carrier, thereby punishing the prior insurance carrier BUT hold on just one moment…  That’s been figured out as well in order to keep transparency in the system. Your claim will also be recorded in the CLUE database—CLUE is the acronym for Comprehensive Loss Underwriting Exchange—which virtually all insurers use. Before issuing a new policy, every carrier will run the national database to check to see the claims record for both the customer and the home in question.

Each company has its own standards to figure out when to drop a homeowner from their customer list; at times of heightened underwriting, it is likely that even the slightest claims activity will raise an eyebrow.  In normal times, most insurance carriers are more cautious when they see either a non-weather water damage claim or a personal liability claim.

Denial of Insurance Claim

Insurers sometimes decline to cover claims. In most states, they’re required to send you a copy of your policy and identify the language they’re relying on in the denial. Read that carefully because your insurer may be misreading or improperly stretching the policy language.

If you believe your insurer is being stingy, argue your case with the adjuster and if necessary, ask for the claim to be reviewed by the claims supervisor. The state department of insurance may also help. You may eventually need to consult an attorney if the extent of your losses warrants legal assistance.