Should You File a Home Insurance Claim?
When disaster strikes your home, the last thing you want to worry about is whether filing an insurance claim will cost you more in the long run—or worse, get your policy canceled. Homeowners insurance is a safety net, but it comes with a catch: use it too often or for the wrong reasons, and you might find yourself facing increased premiums or losing coverage entirely. So, how do you decide when to file a claim? Let's dive into the complexities of homeowners insurance claims and how to make the best financial decision.
#### Understanding Deductibles and Liability
Insurance policies typically require you to report damage to your property promptly—usually within two weeks to 30 days, depending on the type of claim. But before you rush to file, it's crucial to assess the damage against your deductible. If the repair costs exceed your deductible, it might seem like a no-brainer to file a claim. However, Jerry Oshinsky, a partner at Jenner & Block, suggests that this is generally a good rule to follow, with the average claim totaling $7,368 compared to the average annual premium of $804.
In cases of personal injury on your property, it's always wise to file a claim, regardless of the deductible or claim size. Personal injury claims can quickly escalate, potentially leading to large settlements. Steve Rivers, an independent broker, shares a sobering example of a homeowner whose contractor suffered a fatal accident on her property. Filing a claim in such instances provides crucial protection, even if you're not at fault.
#### When to Skip Filing a Claim
Some claims are better left unfiled, especially when it comes to water damage. Jonathan G. Stein, a consumer attorney, cautions against reporting water damage under $10,000 due to insurers' concerns about mold, which could lead to policy cancellation. However, Rivers notes that this isn't always the case, as he's seen policyholders file for water damage without facing premium hikes.
For non-water damage, Stein advises against reporting claims under $3,000. The math is simple: if you file a $2,500 claim with a $500 deductible and your premiums increase by $500 annually for three years, you end up paying more than you recover. Moreover, your claim history is recorded in the CLUE database for seven years, affecting your ability to get affordable coverage in the future.
#### Dealing with Multiple Claims and Potential Nonrenewal
Filing multiple claims within a short period is risky. Two or three claims over a couple of years could lead to nonrenewal of your policy. Each insurer has different thresholds for dropping a homeowner, with some tolerating a mix of weather-related and non-weather-related claims before severing ties.
If you're facing damages you can't afford without filing a claim, consider a short-term loan. The interest you'll pay on the loan may be less than the additional premiums you'd incur by filing a claim.
#### Handling Claim Denials
Sometimes insurers deny claims, but they must provide policy details and the reasoning behind the denial. It's essential to review this information carefully, as insurers may misinterpret or stretch policy language. If you believe your claim was unjustly denied, start by discussing it with the adjuster and agent. Filing a complaint with your state's department of insurance can also be effective. In extreme cases, consulting an attorney may be necessary, especially if the losses are significant.
#### Final Thoughts
Deciding whether to file a homeowners insurance claim is a delicate balance between protecting your financial interests and maintaining your insurance coverage. Always weigh the cost of repairs against your deductible, consider the long-term implications of filing a claim, and be prepared to challenge any denials that seem unjust. With careful consideration and a clear understanding of your policy, you can navigate the complexities of homeowners insurance claims with confidence.