If something relatively small goes wrong at your home, whether to file a claim with the homeowners insurance company or not is always a difficult decision. You have to carefully consider whether doing so might negatively affect your premium (and your bank account) in the long run.
The fact of the matter is that a home insurance claim remains on your CLUE (Comprehensive loss Underwriting Exchange) report for as long as seven years. This helps your current (and future) insurance company to calculate the likelihood that you will soon submit another claim. Too many claims can cause an insurer to void your policy if it believes the risk is getting too high. You could also see an increase in your premiums after filing a claim for an accidental or unexpected incident.
Understanding when not to file a claim is, therefore, as important as knowing when it will benefit you to submit one. Let us look at the various factors involved.
When is it better not to file a claim on your home insurance?
Below are a couple of examples of when it’s not in your best interest to file a claim.
1. The type of claim is not covered by your policy
It’s important to know exactly what your home insurance policy covers and what is not covered. Most policies include causes such as theft, windstorms, and fires and exclude things like flooding and earthquakes. Save yourself (and the insurer) the trouble of submitting a claim for an event that is not covered. Please call our insurance office and speak with one of our underwriters to discuss the likelihood that your claim will be covered.
2. The amount of the claim is only slightly higher than your deductible
The same logic applies where the cost of fixing whatever damage your house suffered is only slightly more than your deductible. Let’s assume, for example, that the deductible is $750 and a small fire causes damages to the amount of $2 000. Yes, you can submit a claim and the insurer will most likely pay out $1 250 ($2 000 less $750). But if they then go ahead and increase your annual premium by $500, you will after only three years already have paid $1 500 to recover a loss of $1 250.
3. If your claim is due to a lack of proper home maintenance
As the homeowner, you are responsible to take care of basic maintenance and upkeep, so the insurer will not pay for claims that result from you not keeping your side of the agreement. Let’s say e.g. your roof is already in a bad state after many years of neglect. If it should collapse after a severe snowstorm, the insurer is likely to reject the claim because the damage could have been prevented by proper maintenance.
Even worse: if you try to submit a claim under these circumstances, they might decide to cancel your policy.
4. If you filed another claim in the recent past
Insurance firms see red lights when they examine your claims history and see several claims being submitted within a relatively short period of time. A good rule of thumb is to try your best not to submit more than one claim in a 3-year period.
When is it worth submitting a claim on your home insurance policy?
Now that you know when not to submit a home insurance claim, it’s easy to understand when it is worth it to submit a claim:
1. The damage is significant or there is a total loss
If your house burns down to the ground and you are left without a shirt on your back or a chair to sit on, you will thank the gods that you have home insurance. Submit a claim immediately.
2. The repair cost is significantly more than your deductible
Even if the damage can be repaired, but it will cost multiple times the amount of your deductible, it’s worth filling a home insurance claim. A good example is where the estimated repair cost is $7 500 and your deductible is only $750.
3. It’s the first time you will be claiming in several years
If more than three years have passed since your last claim, filing a claim now is less likely to cause a sharp increase in your insurance premiums than if you submitted one three months ago. It’s all about the perceived risk your policy holds for the insurer.
Please call our Long Island insurance office to discuss any potential claims that you may have so that we can provide you with personal advice.