That is the question. As a Brentwood and Nashville area insurance agent, it’s the one question I get asked most often when counseling clients on their homeowners insurance. It’s a valid question because a claim puts a blemish on your record for five years, which has serious ramifications. You are always within your rights make a claim, but it’s critical to evaluate a few things before making that claim.
Insurance companies are in the business to make a profit, therefore your claims are scrutinized and can be held against you if you have a history of claims. For insurance companies, a pattern of making claims is the best predictor of future claims and is a red flag. The bottom line: when insurance companies determine the risk of insuring your home, your frequency of claims is more important than how much was paid.
My office in Brentwood Tennessee gets calls every week from people who have been cancelled for making too many claims. Unfortunately, the reality is that they will not be able to find a low cost policy and will be forced into the high risk market where premiums are higher, deductibles are higher, and coverage is not as comprehensive.
Insurance companies track your history and judge you accordingly before deciding whether to insure you or not. A long or spotty history of claims sends up red flags that you’ll do it again. That could mean you’re a high risk that they don’t want. All claims are reported to an industry wide database and kept on file for five years - even the ones that were denied. That’s why it’s important to consult with me, your agent, before making a claim!
So when should you file a claim? Here are some basic rules to follow:
- Never file a claim if the damage is less than the deductible— it won’t be covered – and it’ll be a blemish on your record. As a consumer, it’s important that you determine the amount of damage before making a claim. Very important: a claim is a claim even if nothing is paid, insurance companies say it’s still an intent to make a claim. In addition, you should carefully consider making a claim if the damage is only a few hundred dollars over the deductible. If you have $1200 of damage and a $1000 deductible, you’ll pay the first $1000 and only get $200. A good rule of thumb is: make a claim when the damage is twice the deductible.
- Make sure you’re covered. After heavy rains or hurricanes, many homeowners mistakenly think they have coverage and file a claim. Again, call me first. Traditional homeowners insurance does not cover damage caused by incoming ground water or flood water. That’s a separate policy underwritten by the National Flood Insurance Program. Remember: if you file a claim and it’s denied, it’ll be a blemish that sticks for five years.
- Think about the last time you filed a claim. Really, how long has it been? If you’re a consistent claimant, you’re going to get slammed on rates or worse, get cancelled. It’s not unusual for the average homeowner to file 1-2 claims in a 10-year period, but 2-3 claims in a 5-year span and you are playing with fire, and are considered a high risk. If you know these numbers, and don’t take advantage of the system, you’ll get the best rates the industry has to offer.
- Don’t submit claims for what is really a home-maintenance project. If the fence is getting old and rotting away, fix it. If the roof is old and needs replacing, replace it, even if your neighbor’s roof was covered by insurance and yours was not. Have a household budget for maintenance and improvements. There’s an upside as well: not only do you get a better looking home, but a well- maintained home gets better rates.
You can take that to the bank.
Written by Scott Johnston, Johnston & Associates Insurance, 7003 Chadwick Dr, Suite 298, Brentwood TN 37027, 615-915-1521