Home insurance is there to protect you from unexpected events but knowing when to file a claim—and when not to—can help save you money and stress. Premiums have been rising due to increasing claims and higher material costs, and filing a claim in the wrong situation can impact your renewal rates. Here’s what you need to know about deciding whether to file a homeowners claim.
Understanding Your Deductible
Your deductible is the amount you’ll need to pay out of pocket before your insurance kicks in. For example, if your roof is damaged in a storm and the total cost to repair is $10,000 with a $1,000 deductible, you’d pay the $1,000, and the insurance would cover the remaining $9,000.
However, if the cost of the repair is only slightly above your deductible, it might be worth considering paying out of pocket to avoid the potential long-term cost of increased premiums.
When You May Not Need to Pay a Deductible
There are situations where your deductible may not apply, such as:
- Liability Coverage: If someone is injured on your property, you typically don’t pay a deductible.
- Medical Payments: Home insurance often covers medical expenses for guests injured at your home, up to a certain amount.
- Additional Living Expenses (ALE): If your home becomes uninhabitable due to a covered loss, ALE helps with hotel bills and meals, without requiring a deductible.
Sublimit and Coverage Limits
Sublimit are specific limits within your policy for certain types of damage, like debris removal. For instance, if a tree falls on your shed, your policy may cover the shed replacement up to a certain amount, but tree removal may have a sublimit (e.g., $1,500 per tree), meaning you’ll need to cover any excess.
Should You File a Claim?
Here’s how to approach different situations:
For Big-Ticket Items or Disasters
Insurance is designed for significant losses that go well beyond what you can comfortably afford. If a catastrophe causes damage far beyond your deductible, filing a claim makes sense. This can include severe damage to your home or legal liability issues like dog bites or accidental damage to someone else’s property.
For Small, Manageable Repairs
Filing a claim for small damages might not be worth it. If the repair cost is only slightly above your deductible, the rate increase after a claim could cost more in the long run. Plus, filing frequent claims can make insurers see you as a higher risk, leading to premium hikes or even non-renewal of your policy.
Many insurers also offer discounts for claim-free histories, so filing for minor damages may cause you to lose those benefits.
What Could Lead to Nonrenewal?
Insurance companies want low-risk clients. Certain behaviours or claims history could lead to nonrenewal of your policy, such as:
- Frequent Claims: Multiple claims within a short time frame can be a red flag for insurers.
- Negligence: Claims related to lack of maintenance (e.g., water damage from a neglected roof) can label you as a liability.
- Risk Profile Changes: Acquiring high-risk pets or living in areas with increased crime could impact your renewal.
- Payment Issues: Consistently late payments or bounced checks may lead insurers to drop you.
- Home Maintenance: Poor upkeep, like an aging roof or overgrown trees, could result in nonrenewal.
- Changes in Risk Appetite: Insurance companies may reduce coverage or not renew policies in areas with increased risk, such as regions prone to natural disasters or market volatility.
If your insurer chooses not to renew your policy, they are required to provide written notice before it expires, giving you time to find new coverage. The nonrenewal letter must clearly state the reasons for their decision.
When in Doubt, Call Your Broker
If you’re unsure whether filing a claim is the best course of action, talk to your insurance broker. They can walk you through your options and provide advice on whether it’s worth filing a claim or handling the situation out of pocket. Working closely with your broker will help ensure that your coverage fits your needs and that you’re not caught off guard by rising premiums or nonrenewal.
Your insurance is there to protect you from life’s big surprises—but that doesn’t mean every event requires filing a claim. Weigh your options carefully and reach out to your broker if you need guidance on what to do next.
