Home insurance is for disasters big and small. But when you don’t have a total loss (think: a home completely flooded by a hurricane or destroyed by wildfires), it can be hard to determine what losses warrant a claim.
Before we dive in, know that these are suggestions and best practices, not advice. It’s totally up to you when you choose to use your policy and file a claim.
Here are some signs it might make sense to file a claim.
If a loss will cost significantly more than your insurance deductible to repair or replace your property, filing a claim may be the way to go. If the cost is less than your deductible, your insurance wouldn’t kick in until that deductible is met. You’d be paying that amount out of pocket either way, and filing a claim would only increase your premium.
But what do you do when the loss value is somewhere in between?
Let’s take a look at some examples to give you a better idea.
Example 1: Your deck’s support beam has slowly been eaten by termites and collapses. Because termite damage is considered a wear-and-tear issue, the claim would likely be denied if you filed it. Even a denied claim on your record can cause your premiums to go up with some insurance companies.
Example 2: Your pipe burst 18 months ago, and you made a claim valued at $40,000 to repair your bathroom cabinets, floors, walls, and some of the carpet in the hallway. But now you have a second pipe failure that caused $5,000 in damages. You have a $2,000 deductible. Your insurance premiums already went up with the first claim and will go up even more with the second (or risk being cancelled in some cases). This may be a time to pay out of pocket.
The takeaway: Your claims history, the amount of damage, and what your policy covers all play a role in when to file a claim.
This is when you really need your insurance to come through. Your policy is designed to cover unexpected incidents that make your home uninhabitable. If you have a total loss that your policy covers, filing a claim is a no-brainer and the quickest way to get your life back to normal.
Every homeowner has a Comprehensive Loss Underwriting Exchange (CLUE) report, which is a comprehensive record of your entire loss history. Claims usually stay on this report for seven years.
Insurance companies use this report to help them predict how likely you are to file a claim in the future. The more claims you have on your record, the more likely you are to file a claim (statistically speaking), and the higher your premiums may be. The reverse is also true: a claims-free record is usually awarded with lower rates.
Most insurance companies pay particular attention to the last three years of your loss history. If you go three years without another claim, the incident may be considered isolated and your premiums may go back down. You can use this timeframe to gauge when filing a claim might make sense if you’re on the fence and already have a claims history.
If you don’t have a claims history, the typical premium increase is about 9 percent, but that depends on your insurer.
Being savvy about when to file and when to repair on your own can help you save more on insurance in the long run. Here are some instances when you probably don’t want to file a claim:
If you’ve run the numbers but still aren’t sure if you should file a claim for fear it will be denied, it helps to know what causes a claim to get turned down for coverage. These are the top reasons insurers deny claims:
Remember: your insurance company is there to help you. If you’re not sure whether to file a claim, ask. Most insurers won’t force you into a claim or stop you from filing one. Ask a lot of questions to make sure you’re comfortable with the likelihood of getting the claim approved.
Insurance rates don’t go up based on the value of the claim. They go up simply because you had a claim. But some types of claims do impact your rates more than others.
For example, catastrophic claims (think: wildfires and hurricanes) have less impact on your rates than, say, a dog bite or theft claim. The logic is that you may have slightly more control over those losses, whereas no one can control a hurricane.
That said, on average, premiums go up about 9 percent after a first claim and 20 percent after a second claim. That’s because decades of data shows that someone who has one claim is very likely to have another claim within three years. The claims tend to get more expensive each time, too.
That said, your policy is meant to help you deal with acute losses. Use it when you really need it.
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