To File Or Not To File…That’s The Financial Question

StormDamage.06.29.12 006There are many types of coverage offered on a typical homeowner’s policy, but the question of whether or not to file a claim versus footing the bill yourself for any damage often arises.

This may seem contradictory – purchasing insurance but then not filing a claim – but there are actually good reasons not to file.  Many carriers offer loss free credits or provide a better pricing tier for customers with no claims history. Claim frequency and claim payout amounts are often used to help determine whether or not an insurance carrier will renew your policy in the coming year. A homeowner who is constantly filing claims is more likely to be nonrenewed than a homeowner with one claim in a three-year span.

However, this is not to say you cannot file a smaller claim. A claim for $1,000 does not necessarily mean you will be nonrenewed.  If the coverage is there, the insurance carrier will cover that loss. You simply need to weigh the pros and cons of filing and decide what’s best for you financially with the understanding that the greater the frequency of claims filed, the greater the chance of increases in premium or nonrenewal of your policy.

For instance, fallen trees are a common occurrence during storm season. Tree removal can be a costly affair, especially if you have several trees that have fallen on your property. Most carriers have certain stipulations regarding when tree removal is covered and how much they will pay out. Some carriers require that the tree or trees must have landed on a covered structure or block a driveway, while others may cover any tree that falls on the property. Most carriers also cap the amount that they will pay for any loss at $500, regardless of the total cost or number of trees fallen.  If you have a $1,000 deductible on your home policy and have three trees fall with a $1,200 bill from the tree removal company, you may end up with a claim check for $200. You will pay the remaining $1,000 out-of-pocket to cover your deductible.  In this situation, it may be better to just pay for the damage yourself.

My suggestion is to contact your insurance agent to discuss the situation before filing a claim. You want to be sure that there are no coverage issues or limitations surrounding the loss that may leave you on the hook for the majority of the damage.  Once you discuss this with your agent, assess the damage and get an estimate for repairs so that you have an understanding of the cost involved, You may find that some losses are much less expensive than you would think (and vice versa).

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