When should you file a homeowners insurance claim or not? An over-simplified guide for you.
Is there damage at your home and do you want your insurance policy to pay for it? That is the reason why you have homeowners insurance, right? Well, you need to be smart about it.
Disclaimer: We (Ullrich Insurance) are the insurance agent. We are not allowed to tell a client “you can’t file a claim for that.” It is your choice if you ever want to file a claim or not. That said, WE UNDERSTAND HOW INSURANCE WORKS at a very deep level and we can give you some recommendations. Please know that we don’t make the rules. We just understand how the rules work. Don’t get mad at me for what I am going to tell you! Thank you! 🙂
Here are three principles that you need to understand about homeowners insurance claims:
#1) When you file a homeowners insurance claim, the claim will show up on a “insurance claims report” associated with your name for at least five years. This claim will make your homeowners insurance premium increase for each of these five years, while this claim is “on your record.”
#2) The more homeowners insurance claims that you have in this five year period, the more “rate increases” or “negative consequences” you will have. It is like the negative affects multiple upon each other, not just add upon each other. One claim is not a big deal. Two claims is more of a big deal, and more than two claims is a really big deal.
#3) If you have two homeowners insurance claims in a five year period, you might get cancelled by the insurance company. NOTE: It isn’t a HUGE DEAL if you get cancelled because we represent MANY insurance companies. That said, there can be certain challenges if a homeowners insurance policy is cancelled. If you have a home that is harder to insure (a home in the mountains, for example) then you really don’t want to get cancelled.
Now that you understand the three principles, here is some advice:
#1) When there is damage to your home, consider the dollar amount of the damage, consider your deductible, and consider how much money you will get from the insurance company for the claim:
-Let’s say that a pipe froze and burst and there is water damage to your home. Let’s say that the dollar amount of the damage is $5,000 and your homeowners insurance deductible is $2,500. This means that you would receive $2,500 from the insurance company to get the home repaired.
#2) After you know how much money you would receive from the insurance company, remember that it will make your rates go up for five years and consider if it is worth filing that insurance claim.
-Let’s say that you receive $2,500 from the insurance company for the claim. Is it worth it to file the claim and have your homeowners insurance premium increase for five years?
-What if you already have a claim on your record, is it worth it to have a second claim?
-Or, if you file the first claim, you are just one claim away from two claims, and the negative impact of having two claims is pretty big!
Here is the biggest question that you might have right now: Well, how much will my rates go up for five years if I file the claim? The answer is “it depends.” Over the course of a five years, it might amount to a total of at least a couple thousand dollars or more!
Final thoughts and challenges with all of this:
-This is Jared Ullrich, owner of Ullrich Insurance writing this article. Many insurance agents don’t even get involved in if a client should file a claim or not. They are too afraid of the client getting mad at them, or giving bad advice. They just tell their clients “go ahead and file the claim.” For me, I like to teach our clients principles of how insurance works. I want our clients to make good, smart, strategic decisions that will benefit them in the long term.
-Here is a challenge that you need to be aware of: What if there is a small amount of damage and you decide to not file a claim. What if, while you are paying for it to fix the damage yourself (not going through insurance), you find out that it is actually a much bigger and more expensive problem than you realized? If you ever want to tell an insurance company “Hey, this damage happened and I wanted to pay for it myself and not file a claim, but then I found out that there is more damage than I realized and I want to file a claim now,” just make sure that you are acting fast. Insurance companies have a provision that says that you need to report a claim a reasonable amount of time after the damage has happened. If you try to file a claim for an event that happened longer than a “reasonable amount of time” ago, then they might want to deny that claim. If there is damage to your home, especially WATER DAMAGE, you need to act fast!!
Questions and answers:
Q: What if you have damage at your home and what if you don’t know the dollar amount of the damage? What do you do?
A: If you have damage at your home but you don’t know how much damage there is, or if you want to know the dollar amount of the damage, call a restoration company and ask them to come over to your home and give you a free estimate. Tell them to give you an assessment of what is happening, and tell them to not do anything that will cost money. Tell them that you are still deciding if you want to file a claim or not.