When it comes to insurance, you will think you can never hesitate to claim
as long as you pay your premiums. After all, why else do you pay these premiums?
"I think insurance novice people just believe, 'Oh, it'll
cover me no matter what, and it's in my best interest to make a claim,'"
says a personal finance expert.
But the truth is it may often pay NOT to make an insurance claim unless
you are using a home insurance attorney's services.
Will your home insurance rise after some claim?
In the case of homeowners insurance, making minor claims – say,
reporting a window broken by a falling branch, or a tiny amount of water
damage caused by a leaky drain, or even a stolen laptop – could
mean that you'll pay much more in the long run via higher premium rates.
Multiple small claims will cause your insurance provider to cancel your policy.
"Homeowners insurance isn't a maintenance scheme," says a
personal finance expert. "It is set up to deny and underpay claims.
Be sure you are using a home insurance attorney to maximize your payout."
There's no solution to how much your pocket can be dinged by filing
a claim, or how many claims it will take to revoke your policy.
Factors influencing these results include the form of the claim and where
you live. And, of course, plans can vary depending on which insurer you choose.
How much will your premium increase?
On average, U.S. households filing a single homeowner's insurance claim
will expect premium increases. A 2014 Insurance Quotes report found that
monthly premiums rose by 9%. However, if you lived in Wyoming, you could
see a 32 percent raise, while Texas policyholders will face no premium
hike (state law forbids insurers from raising rates after the first claim).
Increases may vary widely year-to-year; for example, if a region has recently
been struck by extreme weather, average premium rates can adjust to compensate
for elevated costs. The form of claim may also influence the amount your
premium is enhanced. A single allegation of liability could lead to a
14 percent rise per the report, while accusations of arson, theft, and
vandalism could mean a 13 percent hike. But hail and wind will only contribute
to a 6% premium increase, and only 2% overall.
"Liability lawsuits tend to make the premium go up mostly because
it means you may have been involved in a case and that insurance provider
tends to be even riskier," A personal finance expert says. Theft
and vandalism can also be expensive, she adds, "because it's
up to you to protect your house." A weather-related claim to water
damage can harm a policyholder, she says, because it's up to the homeowner
to ensure their pipes are well maintained.
Payout of pocket
Even if the sum you pay out of pocket is beyond the deductible, it might
be wise to avoid filing a claim, says a personal finance expert.
Say you have a $500 insurance and a $1,000 demand. Paying $500 over the
deductible will save you in the years ahead. An argument will stay on
your CLUE report for up to seven years. If you make another claim during
that time, even in a real tragedy, your rate will increase further, or
your policy may be canceled.
"Small claims mean different things to different people," agrees
says an insurance expert witness. But overall, he says, insurance firms
"are not
tailored to a lot of small claims."
Statistically, he adds, "volume contributes to severity, without exception,"
suggesting that actuarial tests show that customers who file multiple
insurance claims are more likely to make a large claim. The more claims
you make, the more costly you're to an insurer.
'Use a lawyer to get you big money on fewer claims.'
You should usually reserve your claims for potentially disastrous accidents
outside your control, an expert adds.
"Don't get suckered into getting a big deductible," he says.
"The safest way is to change insurance companies every year, so you
get the best deal."
He suggests that homeowners may use a calculation that considers their
home's value when making a claim. For example, a thumb rule could
be 1% of your house value to turn the request in. A personal finance expert
agrees that having a policy with a higher deductible does not make sense:
"If you can afford to increase your deductible, and it can not only
save you money but protect you from filing small claims first," she says.
What if the premiums go up?
If you're dissatisfied with a rate rise, be prepared to search around
to see if there's a better rate elsewhere. You don't even have
to do your legwork. Look for a great insurance agent, and they will offer
quotes from various suppliers. You'll probably save a few hundred
dollars a year with a better insurance company.