When Should You File a Homeowners Claim?
Posted on Thu, Jun 30, 2011
Your washing machine overflowed, flooding your laundry room. Or, a tree fell on your shed damaging tools and equipment inside. Should you file a claim with your insurance company? It depends.
Nowadays, insurance carriers are likely to raise premiums or drop coverage altogether when customers make too many claims or the wrong kind of claim. As insurance agents that represent these insurance carriers we are not happy about this practice, but we do recognize that it is reality and we do our best to help our clients understand their choices and the potential effects of those choices.
Unfortunately, there's no cut-and-dried formula for determining when to involve your insurance company. The following are some factors to consider before picking up the phone:
Factors to Consider
When weighing whether or not to submit a claim there are a number of factors to consider including:
- Type of claim
- Estimated amount of claim
- Deductible currently on the policy
- Number of previous claims submitted (whether paid or not)
Type of Claim
The main reason for having insurance is to protect your home from "sudden and accidental" damage that is "catastrophic" in nature.
The tornado or hurricane that dashes your house to bits, the electrical fire or water heater explosion that reduces your house to rubble or the heavy snow or ice storm that causes your garage roof to collapse would all be examples of claims that fit this description and which definitely should be submitted.
But what about the small losses like your child accidentally breaking a window with a wild pitch in the backyard, or the can of paint spilled onto the carpet while you are repainting your living room?
These claims do meet the definition of "sudden and accidental" but probably would not be considered "catastrophic" in most cases.
Estimated Amount of Claim and Deductible Amount Currently on Policy
These two factors should be considered together when deciding whether or not to submit a claim especially if your policy currently carries a lower deductible (less than $1,000). For example, if your policy currently has a $100 deductible and it would take about $125 to repair the window your child accidentally broke by hitting a baseball through it, you would probably not want to risk losing a claim free discount or incurring a claim surcharge for a payment of $25. As a general rule, if the estimated damage is not at least 2 times your deductible, you probably don't want to put in a claim.
You might also want to consider raising that low deductible to at least $1,000. Insurance companies generally give deeper discounts to customers willing to take on much higher deductibles. In the long run, the savings in premiums combined with additional claim free discounts that might be offered would more than pay for the smaller claims that you do not submit.
Number of Previously Submitted Claims
Finally, your current claim history is an important factor to consider, especially in the case of a "borderline claim", one which meets the "sudden and accidental" criteria and where the estimated payout is high, but may not be considered "catastrophic" in a traditional sense. One example might be a case where a windstorm blows a large tree down on a shed in your backyard and it will take about $5,000 to replace the shed and the repair the damage that occurred to the lawnmower and other tools inside.
If you have never submitted a claim before and a weather related claim would not cause you to lose your Claim Free Discount, submitting this type of claim would probably be a wise choice. If, on the other hand, this claim would represent the fourth claim submitted in a three year period and would give your company the right to cancel your policy, you might want to consider absorbing the cost of the damage yourself.
Homeowners insurance can be a wonderful source of protection and peace of mind when approached responsibly. Just make sure that you understand all the potential consequences involved when deciding whether or not to submit a claim. When in doubt as to whether it is in your best interest to file a claim, look to your agent for advice. That's why we're experts in our field.