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When to NOT file a Homeowner’s Claim

There are myths, misnomers, and half-truths concerning home-insurance policies. It is not uncommon for homeowners to think they are automatically covered for something they may not be. Also, there are times when a homeowner may not believe there is coverage when there is. Those instances, of course, boil down to a homeowner not being entirely familiar with his or her homeowner’s insurance policy.

Damage to property and personal possessions due to storms, fire, theft or vandalism would be normal claims a homeowner would file. Also, in most states, one’s vehicle is considered an extension of one’s home and, therefore, possessions stolen from a vehicle would be covered by a homeowner’s policy, as well. Even if luggage is lost by an airline, homeowner’s insurance, often, allows for reimbursement.

When to NOT file a Claim

With all that being said, it’s important to know when one should not file a homeowner’s claim.  One needs to be careful regarding the filing of insurance claims for a very important reason:  too many claims can result in higher premiums or being dropped by the insurance provider!

Prudence and discernment are key players when it comes to filing claims.  Let’s take a peek at three situations where you should think, twice, before calling the insurance provider.

1. if One or More Claims, Already, Exist

If one or more claims were filed during a period of 10 years, you would want to rethink adding another claim, too soon.  The fact is, insurance is based on averages, and the average for homeowner claims is once every 9 or 10 years!  Many insurance underwriters frown upon policyholders who make more than one claim every decade!  If your claim numbers are considered ‘above average’ by your insurance company, you could face higher premiums – up to double the amount, or more!  Submitting claims with homeowner’s insurance doesn’t operate the same as submitting medical claims, and with homeowner’s insurance, the deductible applies each time a claim is filed. 

A multiple-claims history within a certain amount of time could make you uninsurable and you could find yourself struggling to switch to another home-insurance provider.  Insurance companies have access to a huge database that reveals every claim filed by you, and it would be used to evaluate your level of risk within the insurance industry.

2. If the Claim Benefit is 20% or Less of the Deductible

Homeowner’s insurance isn’t about simply filing claims, willy-nilly, to ensure the homeowner is free and clear of having to pay an expense.  It’s more nuanced than ‘Submit the Claim and Get Paid’.  Meet Will Tucker, owner of Tucker Agency, in Brentwood, Tennessee.  Mr. Tucker has some words of caution:  “It is wise to not turn in a claim which, after the deductible, is going to pay out only a couple hundred dollars.”  Along those lines, is advice from financial planner, R.J. Weiss.  He recommends that homeowners avoid filing a claim within 20% of the deductible. 

So, here’s a hypothetical:  Your deductible is $2,000 and the covered claim comes to $2,400 with $400 being 20% of the deductible.  According to insurance experts, you should not make the claim to recover a mere $400 – it would, simply, not be worth the unintended consequences of possibly having to pay increased rates that could last for several years.   

3. If Damage Is Due to Poor Maintenance

If a homeowner were to file a claim for interior damage due to a suddenly-leaky roof, one thing the insurance company would do is determine if the roof should have been repaired or replaced before the claim was filed.  If it were determined that lack of a needed roof replacement or lack of proper roof maintenance were the issue and the claim were denied, the story does not end there, unfortunately.  Remember the huge database mentioned, previously?  Even if your leaky-roof damage claim were denied, the claim, itself, would still be noted within the database and that could raise your premiums!  The insurance underwriters’ rationale would be:  If the homeowner is not interested in maintaining the structural integrity of the home, we will consider him or her a ‘higher risk’.  Higher-risk policyholders get socked with higher premiums.

After it’s all said and done, remember that a claim can trigger a premium increase, even if the claim is denied.  The attitude of “I’m paying for this insurance, and I’ll use it, by gosh!” is understandable, but it will, most likely, work against you in the long run if decisions are not weighed, carefully.  The last thing any homeowner wants is raised premiums, a policy cancellation, and/or difficulty finding coverage from another provider.  By using discretion and insight, you will fare better in the end!

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