When Should You Make An Home Insurance Claim
You buy insurance to protect yourself or your belongings from loss and damage. Generally, you use insurance to protect yourself from major expenses that run into large numbers. For that protection, it is worth paying a small premium every year.
Since you consistently pay premiums every year, there is naturally the thought of “cashing in” on all those years of premium payments whenever you see an opportunity to make a claim. However, you need to be careful about every claim that you make because your policy premium could go up as a result of a filed claim.
The more claims that you file, the higher risk you are deemed to be by insurance companies.
In some extreme cases, your policy might even get canceled for causing a loss to the insurance company. If that happens, then other insurance companies will also start evaluating your profile as “high-risk” if you go shopping for a new insurance policy.
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Every claim payout is recorded as a loss by an insurance company. Insurance companies expect policyholders to file claims occasionally. Though “occasionally” does not have any specific definition, it generally means a few years or even a decade.
However, the risk of filing too many claims should not put you off from filing them when you really should be. The question then is when should you file a claim?
Compare the claim amount to your deductible
A deductible is an amount that you (the policyholder) have to pay before the insurance company reimburses any money towards a claim. So, if the claim amount is in the ballpark range of the deductible, then it may be better to not file a claim.
Not only will you prevent the risk of a premium increase, but you will also preserve your chances of getting any no-claim bonus that your policy might offer.
If your claim estimate is way beyond the deductible amount, then you can consider filing a claim. If it is only slightly above the deductible amount, then consider paying the expenses yourself. You basically need to know what your coverage amount is and what the deductible is to make a smart decision.
Ultimately, the calculation that you will have to consider is whether an increase in the premium by a certain amount is worth filing a claim or whether paying for the expenses yourself will, in the long run, is cheaper than a more expensive annual premium.
File a claim if personal liability is involved
If you are involved in a car accident where your car isn’t harmed much but another person is injured, then you may face personal liability.
If someone visits your home or your rental accommodation and gets injured while at your place, then you may face personal liability for any expenses towards treating the injured person. In both these cases, it is always a good idea to file a claim.
Whenever you face personal liability, pick up the phone and explain the entire situation to your insurance company.
Make sure you do it right away because you want to tell your side of the story first. Being the first-mover might be advantageous for your defense in the future if need be.
File a claim when you are certain it’s not your fault
If you file a claim for something which happened because of your negligence or your fault, then there is a chance that the insurance company may not entertain your request.
For example, if you haven’t maintained/replaced your old roof in ages and it gets destroyed during a storm, then you might have a tough time with your claim request. If you replaced the roof and it got damaged, then your claim request is genuine.
Similarly, if you left the faucet open and get water damage as a result, the insurance company will probably not accept your claim. So, file claims when you know for sure that it wasn’t your fault and there was no negligence on your part.
File claims only for events that are covered
It is always a good idea to read your policy before filing a claim. Only file a claim for events that are covered under your policy. If you have doubts, then speak to the insurance company.
You won’t be financially penalized for filing for a claim and getting turned down.
But, for obvious issues which you know aren’t covered under the policy, filing for a claim will reveal to the insurance company that some undesirable event happened. Disclosing such information might work against you in the future.
If you lose something old and valuable, then you have to think about a few things before you file a claim. Firstly, you have to check whether you had itemized the lost valuable in your policy. If not, then you need to check if you had the item appraised before you lost it.
If you did not do that either, then it may be difficult for the insurance company to correctly estimate the value of your lost belonging.
In such a situation, the chances of getting any reasonable reimbursement are dim.
You do not want to risk having a claim on your profile, seeing your insurance premium potentially go up as a result, and losing your no-claim bonus only to receive a paltry reimbursement check.
However, if your policy specifically provides cover for valuables or jewelry, and if you happen to lose your wedding ring, then you know that your claim reimbursement chances are pretty good.
If you know how the insurance company calculates the replacement value/cost of the lost item, then you will have a good idea of how much reimbursement you can expect. Companies follow calculation methods like actual cost value, replacement cost, or guaranteed replacement cost.
Act promptly when there is damage throughout a larger geographic area
If your insurance policy covers natural or weather-related events like snowstorms, windstorms, etc. and if you are unfortunately hit by such an event, then you would want to file your claim as early as possible.
The reason for moving quickly is the fact that such events cause damage to a larger geographic area. The area could be your neighborhood, district, or state.
When widespread damage occurs, many policyholders are going to make claims. The queue for getting claims processed will be long and you want to make sure that you are at the front of that line.
Differential pricing for out-of-pocket expenses vs claimed expenses
If you do pay for expenses out of your pocket, it may be a good idea to let a service company know that you are doing so and that you aren’t planning to file a claim.
Service companies often have different pricing for individuals and insurance companies. They tend to assume that you will file a claim and charge you a higher amount as a result.
So, by clarifying, you can insist that they charge you a reasonable price for the repair/replacement work that they perform.
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