Should I use my insurance for these types of repairs?

19 Feb
comparing homeowners insurance coverage plans and claims

It’s been a tough winter in many areas across the country. In fact, at one point this winter, roughly two-thirds of Americans were in an area that was below freezing and in many cases, well below zero. This type of cold can do some serious damage to your home.

Everything from cracked windows to burst pipes, ice dams and even collapsed roofs can crop up during severe winters which may leave you wondering if your homeowners insurance will cover the damage. 

While homeowners insurance will almost certainly cover this type of damage, the other question you should be asking is, should I use my insurance for these types of repairs.

A Claim Can Result in a Premium Increase

When it comes to homeowners insurance, the general rule of thumb is to save it for truly catastrophic damage and cover smaller claims out of pocket. Despite the fact that your insurer will absolutely cover this type of winter damage, it may result in a premium increase or in more drastic situations, a non-renewal. 

Most insurance companies will raise your rates if you make a claim on your policy, especially if it is a large claim and in some cases they may refuse to renew your policy when the time comes if you have made numerous claims on your policy.

Insurers keep detailed records and love statistics and the stats show that customers who make numerous claims are a much bigger risk, which translates into a much higher premium.

Every time you file a claim, your insurer makes a notation in the Comprehensive Loss Underwriting Exchange (C.L.U.E.), which is a shared database that all insurers check before writing a new policy. If you end up with a number of claims on your record both your current insurer and others you might be shopping your coverage with may end up refusing to write a policy. 

You can have trouble finding a policy for up to three years if your C.L.U.E. report is less than stellar. 

While each situation is different there are a few scenerios where it almost never makes sense to file a claim on your homeowners policy:

  • Repairs cost less than your deductible
  • Damages are relatively minor
  • You’ve filed more than one claim in the past decade
  • The claim was caused by poor maintenance on your part
  • The cause of the claim isn’t covered by your policy

When Should I Make a Claim?

Obviously, if not filing a claim will cause you severe economic hardship then filing a claim makes sense. However, if you can afford it, most experts recommend paying claims under $3,000 out of pocket and many go as high as $10,000 for water damage claims as these tend to result in a very significant increase. 

While this may seem unfair, after all you paid for the insurance, most states allow insurance companies to raise your rates (penalize you basically) when you make a claim. Some state do limit the amount an insurer can push up your rates after a claim, but most don’t, which leaves it up to you to be strategic about using your insurance. 

In the end, there is no right or wrong answer as to when you should make a claim as everyone’s financial situation is different, but in most cases, if you can comfortably cover the cost of the damage without getting your insurance company involved, this is the best option. 

On the other hand, if the damage is severe (a destroyed roof) or would cause you severe financial hardship, it is best to file a claim with your insurer.

Tips to Lower Your Premium

If you recently made a claim and your rates are headed up, here are a few tips to help lower them:

Shop Your Coverage: This is probably the best way to lower your premium. While most insurers will raise your rates after a claim, the increase can differ dramatically between insurers. Make sure you are comparing apples to apples when it comes to coverage levels and deductibles. 

Raise Your Deductible: Raising your deductible can result in a dramatic discount. If possible, double your deductible but make sure you always choose a deductible that you can easily afford. 

Discounts: While you probably just lost your no claim discount, insurers offer dozens of discounts and making sure you are getting all discounts you qualify for will help keep your premium affordable. 

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