Should I file a small home insurance claim?

Should I file a small homeowners insurance claim?

Probably not and here is why.  Imagine the following scenario: You have a $1,200 bike stolen from your garage and you have a $500 deductible and file a claim so minus your deductible you get a check for $700.  A year goes by and a hail storm damages your roof, not something hard to imagine in Colorado! Now you have a sizable insurance claim also.  A few months later the “non-renewal notice” or very large insurance rate increase occurs, that $700 claim check is completely obliviated.  Now you are paying many hundreds or even thousands more for insurance for at least the next 3 years!

Why do insurance companies raise rates?  Insurance companies base everything off of actuarial statistics and the numbers don’t lie.  What I mean is if you have a claim you are statistically much more likely to have another claim.  So if you are more likely to have a claim in the future what do you think the insurance company will do on renewal?  Yes, they are very likely to raise your rates and if you shop your insurance with another company this claim will show up and affect those rates as well.  This however, is not the only reason you should not turn in a small claim.  What happens if you turn in the small claim and then you have another claim in the  future, 3 years or less?  You are now even a higher insurance risk and your rates will really go up if you are even offered a home insurance renewal.   If you have 2 insurance claims in a 3 year period it is difficult to find homeowners insurance at a decent rate.

How can I protect my home insurance rate?  What can you do beside say that you hate insurance companies?  You can lower your premium by raising your
deductible.  You won’t be tempted to turn in a small claim this way and on average raising your deductible from $500 to $1,000 will save you about 10% to 15% per year even more for higher deductibles.  If you have a claim think about how much money you will get after the deductible is paid out and if in doubt contact your insurance advisor.

November 9th, 2012 by Lightship Insurance