A home is one of the single largest investments most people make in their lifetime. And while the joys of homeownership are hard to overstate, every homeowner knows the challenges that come with maintaining their property. When something goes wrong, your first instinct might be to file a homeowners insurance claim to mitigate the costs and take advantage of the insurance you already pay for – but that’s not always the right decision.
Read on to learn more about the nuances of filing a homeowners insurance claim for your property.
First Things First – Be Prepared
Every new homeowner should start by taking a proper assessment of their property well before they would ever think of needing to file a claim. After all, getting the right insurance is the first step to making a claim that’s financially beneficial for you.
Being prepared means a lot of things for a homeowner, but the key components of preparation should include:
- Calculate the value of your home
- Take a home inventory and estimate the value of everything you own inside
- Take photos or videos of your property’s interior and exterior
- Find a safe place to store this data (ideally outside of the home, such as on a cloud storage solution)
This information is necessary to avoid common issues with homeowner’s insurance in general – such as over or underinsuring your property or not evaluating the right deductible for your needs.
If you do ever get to the point where you need to make a homeowners insurance claim, this information will be invaluable to simplifying the claims process and letting you move on after a major incident.
Understand Deductibles
The world of insurance is full of common terminology you may not be familiar with. Even if you think you know these words, you should double check to make sure you understand how they work in regard to insurance in general and your specific policy!
Primarily, it’s important for you to understand the types of costs associated with your policy before and after making a claim.
Deductibles are a price you must pay before your insurance begins to pay out to your claim. When choosing a policy, you often have a choice in your deductible. High deductible plans can lower your premiums but require you to pay more when you need to make a claim.
While high deductibles are great when your home is in good condition, it can become a financial hurdle if you ever need to use it. The higher your deductible, the fewer situations a homeowners insurance claim will “make sense” financially for you.
Catastrophic damage is the easiest to determine. If your whole home is lost due to a fire or other unpreventable incident, then it’s easy to know that it’s time to file your claim. But for major home repairs, it’s not always so straightforward.
The simple equation for you is to look at the cost of a repair and determine if it’s worth it.
- If your deductible is $1,000 and the repair is $500, then a claim doesn’t make sense.
- If your deductible if $1,000 and the damage is $5,000 or more, then a claim begins to make more sense for you.
Premiums Increases & Policy Termination
On the other hand, you also have premiums. These are payments you make regardless of whether or not you make any claims. Premiums have no effect on your deductible – so it’s not part of the equation when it comes to making a claim directly.
However, it’s worth noting that insurance companies retain the right to raise your deductible if they believe you pose a higher risk than the average homeowner. Making a homeowner’s insurance claim could lead to a higher premium.
More importantly, it’s worth considering that insurance companies need to cover their risks as well. The more claims a homeowner makes, the more likely the insurance provider may start to see them as too high of a risk for their business. In these severe cases, they may choose to terminate your policy entirely!
Was the Damage Preventable?
Lastly, when making a homeowners insurance claim, it’s absolutely critical to reflect on if the problem was preventable. Having homeowner’s insurance doesn’t mean your provider will pay out to every claim. If the damage was caused by negligence, such as intentionally ignoring an important repair, then your claim may be denied, and your policyholder will take note.
A damaged roof, leaky pipe, or other known issues that you chose to ignore can easily lead to catastrophic damage. Don’t put off repairs! Taking your home maintenance seriously is necessary to make sure you don’t experience a denied claim.
Making the Choice
So, when planning a claim, consider both the upfront costs of your deductible and the potential price of an increased premium. Is the damage to your home significant enough that you should make a claim, or should you pay for these repairs out of pocket?
Here are the steps you can take as a homeowner to help make the decision:
Review your Policy – Make sure you understand what your insurance policy covers and does not cover to ensure you don’t file an erroneous claim.
Calculate the Damage – Most home repairs aren’t major ones, so don’t rely on your homeowner’s insurance too much. Pay close attention to the out-of-pocket costs to repair your home to help judge the cost versus a deductible and premium increase.
Consider Past Claims – If the costs to repair have you on the fence about a claim, look to your history of claims. If you’ve made a claim or two within the past year already, make very certain this damage is worth another one, because it’s likely to lead to a premium increase or cancellation.
Ask Questions to the Right People – If you want to contact your insurance company with questions, don’t reach out to the claims department. Their job is to take your information for a claim. You can consider looking to insurance agents or adjustors and making clear that you’re just asking a question to get expert advice.
Contact Iott Insurance for a Quote Today
Iott Insurance has been a part of southeast Michigan for over 50 years. We can help you plan your insurance needs and find you the right policies or plans to protect you.
Or you can visit one of our three offices in southeast Michigan:
Blissfield, MI – (517) 628-4574
Lambertville, MI – (734) 807-3825
Petersburg, MI – (734) 215-9884
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