Ask These 4 Questions Before Filing a Homeowners Insurance Claim
If your home undergoes major damage from an insured peril, filing a claim against your homeowners insurance policy is a no-brainer. But what if the potential loss is smaller? Is it worth filing a claim? Will a smaller claim, or a couple of smaller claims, raise your rates? Or, in the worst-case scenario, will your insurance company drop you after too many claims?
To start, learn about your Comprehensive Loss Underwriting Exchange (CLUE) report. Then, consider these four key questions to determine whether or not to file that claim.
How CLUE Affects Homeowner Insurance Premiums
Your CLUE report is an insurance history report used by insurance companies to determine the risk of insuring a homeowner. It records every claim you’ve filed, whether it was approved or denied, for the past seven years. Any insurance company, not just your current company, can access this information when you apply for, or renew, homeowners.
When you switch insurance providers, for instance, the new insurance company uses the claim data recorded by the previous company to determine what it’s willing to cover and what premium it will charge.
Keep in mind that switching companies doesn’t reset your history or wipe the slate clean. Any claim you make today could impact your homeowners insurance policies for the next seven years, so it’s important to proceed with caution when filing claims.
When does it make sense to file a claim, and when should you avoid filing? Ask yourself the following questions.
How Many Claims Have You Filed Recently?
If you’ve made one or more homeowners insurance claims in the past few years, the claim data on your CLUE report sends the message that you’re a higher risk to insure. Even denied claims are added to CLUE reports. It may seem unfair that claims that ultimately didn’t cost your insurer anything are still part of your record, but they are. (Even if your claim was denied, the insurance company still invested time and money to investigate it.)
Insurance companies may reject your application if they see multiple claims (however small) filed within a specific period. Insurers can also decide not to renew your policy or to raise your premium based on the number of claims filed.
The bottom line: If the damage is not significant and you’ve filed a few times within the last seven years, it might be smarter to not file for a minor claim, one that doesn’t significantly exceed your deductible. This brings us to the next question.
What Is the Cost to Repair or Replace Relative to Your Deductible?
The answer to this question is important, especially if you’ve lowered your premiums by choosing a higher deductible. There are two possible scenarios, and each should be treated differently.
Less than or equal to deductible. If the cost to repair or replace the property in question is less than your deductible, you’ll have to pay for the damages out of pocket. It makes no sense to file a claim that 1) won’t be paid and 2) will only count against you.
Above the deductible. When the total cost to repair or replace exceeds your deductible, contact your insurance partner. He or she can provide guidance regarding how a potential claim will affect your rate. A loss that exceeds the deductible by a few hundred dollars likely doesn’t justify a claim. But insurance, like so many other things, is complicated. Whether or not to file depends on the nature of the claim and the details of your policy. You could do some research and conduct a cost analysis, but a call to your agent or broker will probably be your best bet.
Was the Property Kept in Good Working Condition?
Your insurance company expects you to take care of your property and manage your risk when possible. Most homeowners insurance policies state that the provider will not cover damages arising from lack of maintenance.
For example, if you knew your dishwasher needed repairs for weeks before it overflowed and caused extensive water damage, your homeowners insurance would likely deny the claim—even if your policy covers water damage.
If your claim involves property that malfunctioned due to age or neglect, don’t file. The claim will not only be rejected, but it will also affect your CLUE report.
Are Damages Related to a Covered Peril?
Not everything that might happen to your home is insured. You don’t want to suffer a major loss and then discover insurance doesn’t cover it.
This question might require you to dig deeper into your policy to discover exactly what is covered and what isn’t. One common peril that is almost always excluded from homeowners insurance: flooding.
Like the faulty dishwasher example above, claims that include water damage caused by flooding would not be covered, even if your homeowners insurance policy includes water damage. Filing a claim would only count against you.
Again, a quick call to your insurance agent or broker will confirm whether the loss is covered. More importantly, the right insurance partner can provide all the information you need to make an informed decision now that will pay off for years to come.
If you have questions about policy coverage, call us at 877-576-5200 or request a free insurance review online.
