What good is insurance if my rates go up if I file a claim?

I have had this question asked of me many times. The decision to turn in a claim or not is something decided once you ask yourself a few questions and speak to your agent concerning the ramifications that may affect your policy and rates.

First, is it a covered peril on the policy?

For example, if while moving your furniture around the living room you drop the television. This is not likely covered on your homeowner’s policy. However, if your home were to be burglarized and the television stolen, coverage is likely under the peril of theft.

Second, how much is this going to cost to repair or replace the object damaged or stolen?

This is important since a deductible will be applied and that amount deducted from the claim before payment. For example, let’s say the stolen television is replaceable for $1000 with a deductible of $500. Your net claim payment would be $500. A claim submission may affect your policy for up to 3 years. You may lose your claims free discount and some companies may surcharge for any claims activity. If you are paying $500 year in homeowner’s premium and loose your claims free discount, you could see an increase of $100 a year. With this increase, you would be paying $300 more in premium over the next 3 years with a net benefit from the claim of $200.

You may say that’s fine and I am still ahead. But suppose, a major wind storm happens shortly after and wind destroys your roof with a cost to replace at $3500. Now you have 2 claims in 3 years and this puts you in the high risk pool for insurers. Most companies won’t write a new policy for someone with 2 claims in 3 years or 3 claims in 5 years. You would be kicking yourself for turning in that claim for the television.

Always consult with your agent before filing a claim so you can be informed of the true costs of turning in that claim. If you have an emergency and it is obvious the claims costs will be high don’t hesitate to take necessary measures to safeguard your property and be sure to contact claims right away if your agent is not available.

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