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!

If you don’t file a claim and if you pay out of pocket, here is a risk:
-Let’s say that the dollar amount of the damage is relatively low and you decide to pay out of pocket and not file an insurance claim. Let’s say that you start to pay someone to fix everything and let’s say that it is mostly fixed, then you find out that it is more expensive than you realized and you want to go back and file the claim. There could be a problem with this. The insurance company might say “sorry, the damage is all gone because you started to fix it yourself, so we will not go back and pay for everything.”
-Also, keep in mind that the insurance company has verbiage in the insurance policy that says that if there is damage to the home, you must file the claim in a reasonable amount of time. If you are going to “fix the damage yourself,” you need to be fast and smart about it. If you change your mind and decide that you want the insurance company to pay, then make sure that you file the claim in a “reasonable” amount of time.
-If you do pay out of pocket and fix it yourself, it is very important to find out what caused the damage to the home and make any repairs/replacements to make sure that you PREVENT the claim from happening again, if at all possible. If there is water damage, you need to do a lot of investigating to find out exactly where it came from, then you have to take a lot of action to make sure that you prevent it from happening again. This is very important.

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.

Final thoughts:
-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.

If there is damage to your home, the clock is ticking for you to decide what you want to do. If you aren’t sure, call my cell phone and I can talk you through it to help you figure it out. Call us right away! In the end, remember that it is ALWAYS your choice if you want to file the claim or not. Remember that!