About Homeowners Insurance
You’d think that when you buy homeowners insurance, you could submit claims for any damages covered under your policy. After all, that is the point of having insurance, right?
Not anymore.
Even though insurers must pay claims that are covered by your policy, the small claims could end up costing you a lot more money over the long run. At the least, you could lose a claim free discount. Even worse, your insurer could drop you and make it tough to buy an affordable policy anywhere. Making a claim for a few hundred dollars could end up costing you thousands of dollars in extra premiums.
Most insurers offer claim free discounts, generally shaving about 5 percent off your premium for every year you’ve gone without a claim, with a maximum claim-free discount of 25 to 35 percent after seven to ten years without a claim. If you pay $ 1,000 per year in premiums, for example, submitting a claim for $300 could actually end up costing you more in premium increases for the lost claims-free discount than you received from the insurance company to pay for the claim and that’s just in one year.
Even worse than that, submitting a few small claims could get you dropped the next time your policy is up for renewal. That’s because insurance companies have been looking for any opportunity to improve their financial situations over the past few years. Paying small claims became very expensive, so they started dropping customers who were frequent claims filers. They’re afraid that those people will be more likely to continue filing claims in the future, and are particularly worried about any claims for waterrelated damage, which could eventually lead to very expensive mold issues. In a study by the California Insurance Department, 25 percent of the companies refused to renew the policies of customers who made one or two nonwater damage claims in the past three years. And 32 percent refused to renew policies for people who made one or two water loss claims in the past three years.
