Should You File a Homeowners Insurance Claim?

When life throws you a curveball that damages your home or property, it’s natural to want to file a homeowners insurance claim so that you can recover the cost and return to a normal routine as soon as possible.

After all, isn’t that what homeowners insurance is meant to do?

Yes. Providing peace of mind against loss from (covered) circumstances beyond your control is exactly what homeowners insurance is for.

However, you should consider the impact of the claim by asking a few basic questions. Neglecting this step may mean higher premiums as the claim data cycles through your Comprehensive Loss Underwriting Exchange (C.L.U.E.) report.

C.L.U.E.’s Carryover Impact

A C.L.U.E. report is used by insurance companies to determine the risk of insuring a homeowner. It records a seven-year history of the claims you’ve filed (whether your claim was denied or not). Any insurance 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 at what premium amount.

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 C.L.U.E. report indicates to insurance companies that you’re a higher risk to insure. Even denied claims are added to C.L.U.E. reports.

Insurance companies can reject your application when they see multiple claims (however small) filed within a specific period. They can also decide not to renew your policy or to raise your premium based on the number of claims filed.

If the damage is not significant and you file often, skip this one.

What Is the Cost to Repair or Replace Relative to Your Deductible?

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?

Most homeowners insurance policies state that the provider will not cover damages when appliances or property involved in an incident were in a state of disrepair.

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 C.L.U.E. report.

Are Damages Related to a Covered Peril?

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 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.