Pros and Cons of Filing a Homeowners Insurance Claim
When something unexpected happens to your home, it’s only natural to think of your homeowners insurance. After all, that’s what it’s there for, isn’t it? The Insurance Information Institute says 6% of homes with insurance filed a claim in 2020. However, filing a claim is not always an easy decision, particularly if it could result in higher premiums later on.
Deciding whether or not to file a homeowners insurance claim depends on a variety of factors specific to your situation, including your deductible and other critical considerations. In this friendly guide we’ll walk you through these factors and help you choose wisely.
How does homeowners insurance work?
Let’s first back up and review how homeowners insurance works. You usually pay a fee to keep the policy in force. Every insurer and policy is different but a standard policy usually has some degree of:
- Structural coverage: Protection against damage or destruction to your home due to a covered event.
- Personal property coverage: If your personal property is damaged or destroyed in a covered event, often involving theft, you’re protected. Items commonly covered include furniture, clothing, electronics, etc.
- Liability coverage: Covers you if someone has an accident on your property. If someone gets hurt it can be used to cover medical and/or legal expenses.
- Additional living expenses: If a covered event damages your home to the point where it’s uninhabitable, your policy will likely cover living expenses, such as hotel bills and meals.
In many cases, mortgage lenders require homeowners insurance. Should you decide to file a claim, you’ll usually need to meet your home insurance deductible before your insurer steps in to cover their share. Some deductibles are flat dollar amounts, like for some covered events, while others, such as hurricane deductibles, are calculated as a percentage of your total coverage.
It is important to remember that deductibles can reset on a yearly basis or per event basis. Before filing a claim, it also helps to understand what homeowners insurance coverage typically includes and where exclusions may apply.
Pros of Filing a Homeowners Insurance Claim
Filing a homeowners insurance claim has some benefits , especially if you are incurring heavy costs from an insured event. Here are some pros to consider:
- Financial relief: Suppose you have added a rider to your policy that includes hurricane coverage or additional protections like water backup coverage for certain types of water-related damage. If your home is severely damaged by a hurricane, the cost of repairing or rebuilding could be astronomical. You might want to pay your deductible and let your insurance company handle the rest of the costs.
Disadvantages of Making a Claim on Homeowners Insurance
While filing a claim can provide financial relief, it’s not without its drawbacks. Here are some cons to keep in mind:
- Potential premium increase: Insurance companies will consider how likely you are to make a claim in the future, when determining your premiums. If they see you as higher risk due to your claims history, they may charge you higher premiums in the long term. If you’re concerned about future rate increases, learn how filing a claim can affect homeowners insurance premiums.
- Impact on insurance score: In many states, your credit-based insurance score is one factor that determines what you’ll pay for insurance. If you have a lower credit-based insurance score, which often means you’ve had a history of claims, you might pay more for insurance in the future, and you may not be able to get coverage at all. Studies show that a person with a lower credit score is more likely to make a claim than a person with a higher credit score.
When Should You File a Homeowners Insurance Claim?
Deciding whether or not to make a homeowners insurance claim isn’t always an easy choice. It depends on several things like your deductible and your financial responsibility in the situation. No definitive answer, but the following checklist will help you ask the right questions:
- Did a covered event cause the damage? Check your policy to see if coverage is included, since certain types of water damage may be covered while others are excluded.
- What is the estimated cost to fix the problem? “Work out the financial impact with estimates from the relevant experts.
- How do these costs stack up against your deductible? However, if the costs are less than your deductible, paying out of pocket may be the less costly option. If not, filing a claim could provide the financial relief you need.
Every insurance carrier is different. That’s why it’s so important to do your research. Comparing insurers is a simple way to make sure you’re getting the right policy for your needs, especially if you’re considering changing homeowners insurance after claim concerns or pricing increases.
Our team at Portsmouth Atlantic Insurance is here to answer your questions, review your homeowners insurance coverage, and provide a personalized quote from our network of trusted carriers.
Contact Us today for Auto and Home solutions and learn more about how we can help. Give us a call at 603-431-4020, email at insure@portsmouthatlanticins.com or fill out the form on this page to get started.
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FAQs About Filing a Homeowners Insurance Claim
1. Should I file a homeowners insurance claim for minor damage?
Answer: Not always. If the repair cost is close to or below your deductible, filing a homeowners insurance claim may not make financial sense. Small claims can sometimes lead to higher premiums later, so compare the estimated repair cost against your deductible before deciding.
2. How much does homeowners insurance go up after a claim?
Answer: It depends. A homeowners insurance premium may increase after a claim, but the amount varies by insurer, claim type, your claims history, and local underwriting rules. Multiple claims within a short period often create a bigger pricing impact than a single isolated incident.
3. How long do homeowners insurance claims stay on your record?
Answer: Most homeowners insurance claims stay on your record for around five to seven years. Insurance companies use claims history when evaluating future risk, which can affect your eligibility or premiums if you switch insurers or renew your current homeowners insurance policy.
4. What happens after you file a homeowners insurance claim?
Answer: After you file a homeowners insurance claim, your insurer typically assigns an adjuster, reviews the damage, verifies coverage, and estimates repair costs. You may need to provide photos, receipts, or contractor estimates before the claim is approved, partially approved, or denied.
5. Can filing a homeowners insurance claim get you dropped?
Answer: Yes, repeated claims can increase the risk of non-renewal. Insurance companies may decide not to renew your policy if they view your property or claims history as high risk. A single major claim does not automatically mean your insurer will drop your homeowners coverage.
6. Myth vs Fact: Filing a claim always raises your homeowners insurance premium.
Answer: Myth. Filing a claim does not always raise your premium. Some insurers may forgive a first claim, depending on your policy and claim history. However, certain claim types, frequent claims, or high-cost payouts may increase future homeowners insurance costs.
7. Myth vs Fact: You should always use homeowners insurance for any home damage.
Answer: Myth. Homeowners insurance is designed for significant covered losses, not every repair issue. Filing claims for minor damage may cost more in the long run if premium increases outweigh the reimbursement. Many homeowners choose to pay smaller repairs out of pocket.
8. What damages are not covered by homeowners insurance?
Answer: Standard homeowners insurance usually excludes flood damage, earthquake damage, routine wear and tear, pest infestations, and neglect-related issues. Coverage varies by policy, so review exclusions carefully before filing a homeowners insurance claim to avoid surprises during the claims process.
9. How soon should I file a homeowners insurance claim after damage?
Answer: You should file as soon as reasonably possible after discovering covered damage. Many insurance policies require prompt reporting, and delays can complicate claim approval. Document the damage immediately with photos and receipts while taking steps to prevent further property damage.
10. Do I have to pay my deductible before insurance pays a claim?
Answer: Yes, in most cases. Your homeowners insurance deductible is the amount you are responsible for before coverage begins paying for a covered loss. If your repair cost is less than your deductible, your insurer typically will not issue a claim payment.