Making Small Homeowners Insurance Claims

Beyond using homeowners insurance as financial protection against disasters, many use it like a checking account to alleviate the small “fix-it” burdens of owning a home. Although you promptly paid your premium, and your claim is completely legitimate, be aware that filing a claim can affect how much you may pay for insurance in the future and can severely limit the selection of companies that will be willing to cover you.
Quality homeowners insurance companies are there when you really need them; however, they don’t like claims—it impacts profits. With much controversy, some carriers are becoming more unwilling to insure homes with any claims, regardless of the extent of the damage. Consequently, it’s not unheard of for the policyholder that made a claim to experience dramatic increases in premiums or to simply receive a heartless non-renewal notice. Unfortunately, given the recent natural disasters, the affordability of homeowners insurance has become a privilege for those who don’t make claims.
Aside from the consequences of making a homeowners claim, understand the fundamental purpose of homeowners insurance: it’s intended to protect you from truly devastating financial disasters that disrupt your quality of life. From a very simplified perspective, homeowners insurance is better suited for a tree through a roof rather than a branch through a window. After accounting for rate increases and the time needed to find a new carrier, small claims can easily exceed the cost of the actual damage. Prepare for the decision of filing a claim or paying out-of-pocket ahead of time by determining the amount you are willing to pay yourself. Deductibles are an easy place to start with this exercise. If you are able to increase your deductible from $500 to $1000, then the decision to make a claim can be as simple as: “Is the damage more expensive than my deductible?” Incidentally, increasing your deductible from $500 to $1000 could save you up to 25% on the price of the premium, so if you are really prudent, you could put those savings away in an account to pay for a small claim in the future.
Just as your driving record shows all of your accidents and tickets over a period of time, your home has a similar record of historic homeowners insurance claims. Known as CLUE (Comprehensive Loss Underwriting Exchange), most insurance carriers subscribe to this database in order to maintain and verify underwriting information. In the same manner that your driving record can affect your desirability to a new employer, insurance claims on your home can travel far beyond just the price of insurance. If you ever decide to sell your home, prospective buyers are likely to review the claims history since they will inherit its “less than perfect” record if they decide to purchase the home.
Although it’s always wonderful to save money, paying out-of-pocket for what seems like a minor claim is not a hard-and-fast rule. When the event that affects your home involves liability for another party, where the smallest possibility of a lawsuit looms, protect yourself by notifying your insurance company immediately. Even if the person injured on your property passively excuses the situation, be aware that you are still subject to the risk of his/her long-term injury and corresponding lawsuit