Before Filing a Claim, Ask Yourself Three Questions

If your house burns down, burglars strip your home of valuables, or a tree caves in your roof, there’s no question. Contact your insurance company or agent/broker immediately, and start the claims process by filing an insurance claim.

But what if your home suffers more minor damage, or a deep freeze causes a pipe to burst? Should you file a claim? Will your premium increase if you do?

If you’re not sure whether to file a claim, ask yourself these questions.

1. Is My Loss Covered?

If your home is damaged, the cause of the damage will often determine whether your loss is covered. Typically, for example, the following causes would be covered:

• Wind
• Hail
• Water (burst pipe)
• Theft
• Fire

Unless you have separate flood insurance, some types of water damage won’t be covered. Nor will normal wear and tear or earth movement.

This will vary by state. For instance, losses due to sinkholes are covered in Tennessee and Florida. Also, some states mandate certain types of coverage.

The solution: Read your policy before filing a claim. This document will provide specific information about what is and isn’t covered.

2. What Is My Deductible?

Even if your loss is covered, it might be less than your deductible. Or it might not enough to justify filing an insurance claim. A broken window or a few shingles blown off the roof can probably be repaired or replaced for less than your deductible.

After all, one of the best ways to save money on insurance is to raise your deductible—and to use those savings to pay for small losses out of pocket instead of filing an insurance claim.

3. Are There Policy Limits for My Loss?

If jewelry, guns, comic books and collectibles are stolen or damaged, they may only be partially covered, or not covered at all, in your policy.

Certain items are excluded or limited in most standard homeowners’ policies.

But if you’re a collector, don’t despair. A rider (extra insurance) can usually be purchased to cover those items.

Will My Premium Increase or Will I Be Dropped for Filing an Insurance Claim?

Deciding whether or not to file a claim may seem counter-intuitive. You bought insurance to protect yourself from loss. Why shouldn’t you report a loss?

Insurance companies differ as to how they determine an individual as an insurance risk. Still, it’s important to be aware that your insurance company will list the details about any claim in the Comprehensive Loss Underwriting Exchange (C.L.U.E.), a database that insurers share.

If you have too many claims in the C.L.U.E. database, insurers may either deny you coverage or charge you more. How many is too many? One rule of thumb is that more than one claim in a decade can be a red flag for insurance companies. Again, standards vary by company.

As an aside, some policies have financial benefits for homeowners who go a certain length of time without filing a claim. Check your policy for details.

For most people, homeowner’s insurance is something to protect you in the event of serious or devastating loss, however you define that. Think carefully about filing smaller claims. When in doubt, your broker/agent should be able to advise you.

If you have any questions about insurance coverage or would like a free insurance review, please call us at 877-576-5200.