You have an incident in your home that you think can be turned in to your homeowner’s insurance agent. Be careful, though. There are times you should definitely not file that claim, or even disclose the incident to your insurance agent. More on that later.
All insurance companies pay very close attention to their customers who file claims. Every time one asks them to pick up the tab for a claim, they flag the account. Too many, even only two, claim flags and an insured becomes the dreaded unprofitable customer. The company will either opt to raise their rates – or cancel/non-renew the policy. Often without regard to how long that customer has been loyal, premiums-promptly-paid.
It is wise to think of your homeowners’ policy as being there to protect you from big financially devastating losses, not as a reserve fund for the relatively minor maintenance mishaps. With this in mind, it may be less costly over the long run if you don’t file that claim and pay for the repairs from your own resources. This is called self-insuring a loss and prudent people do this all the time, even though it feels painful at that time.
When a problem occurs in your home it is perfectly fine to speak to someone knowledgeable first, other than your insurance company or its agent. By looking at all your options before initiating a claim, you can then make a more informed and rational decision to protect your financial situation. Sometimes it can be better to be your own insurance company and preserve your cordial relationship with BIG Insurance Company for the long haul.
1. The loss is water damage. If you’re thinking of filing a smallish claim on your homeowner policy due to water or mold, please think twice. Also, discuss this with a reputable restoration company. Since water problems can involve complicated repairs, and may be persistent, insurance companies hate to see them. Most policies also specifically exclude any coverage for mold and fungus, so without a mold rider on the policy all you’ll get is shallow sympathy from a claim adjuster.
One small water-related claim can cause you significant future challenges. Not only can it give your insurer justification to drop you, but there will likely be a record of your claim in the national insurance company database called CLUE. CLUE is now queried by most all personal lines insurance underwriters. The next agent might refuse to sell you an affordable policy if you do get cancelled by your current carrier. The history also can later lead to difficulties selling the home, if prospective buyers find that they can’t easily get insurance for it. (CLUE records the property address where a claim originated.)
Moral: What they don’t know about doesn’t ding you later! Protect your CLUE score!
2. The claim isn’t more than your deductible. What is your deductible? If your policy has a $500 deductible, you really should not bother filing a $600 claim, as the policy will only pay $100, and the claim still counts against you – especially if you should end up having to file another within the next few years. So don’t file the claim or even visit with your agent, again to keep your CLUE score squeaky clean. Be aware that in Montana the agent works for the insurance company not you and is often obligated to notify your insurer of your mishap – even if zero dollars are ever paid out on a claim!
You should also consider setting your policy’s deductible at a higher level. $1,000 or greater deductibles can significantly reduce your annual premiums. The more you can comfortably self-insure, the less your insurance costs – up to a point.
3. The damage could have been prevented.
Before asking the insurance company to cover damage in the home, ask yourself whether you contributed to the damage by failing to do basic preventive maintenance which led to the bigger problem. Insurance policies were designed to cover specific, unforeseen perils, not pay for maintenance of aging properties. So, negligence in anticipating the problem and proactively maintaining the home will generally not be reimbursable.
As an example, you sustain serious water damage and mold in your living space from a leaky, worn out roof that should have been replaced years ago. Your water problem was then foreseeable and could have been avoided with responsible home maintenance. That’s different from the sudden and unforeseen incident, or peril, that quickly damages your roof. Water and other damage from perils like a hail storm or tree blown onto the house will usually get repairs paid from the standard homeowners’ insurance policy.
Damage from pests such as bats, vermin or insects, mold and mildew, however, is never covered because the presence of pests in the home signals an ongoing lack of normal, attentive care in maintaining a property to keep pests away. Don’t think this might be a claim. You’ll effectively signal an insurance company that you don’t take care of your property. Alarm bells will then sound loudly in the home office at Big Insurance Company.
If trouble from Water, Fire/Smoke, or Mold, even Packrats appears in your home, FLOODCO should be your FIRST CALL. We have many years of experience helping homeowners with these and other mishaps and can assist you to an informed decision on whether to call in an insurance claim – while quickly taking all necessary steps to prevent further, expensive damage to the home or its furnishings.
Questions? Call FLOODCO FIRST (406) 892-1717. We’ll respond with care 24/7/365 days a year.