You can file a home insurance claim for a lot more than you might think. Lost, stolen, and damaged phones, computer equipment and personal property can all be covered. Some cases of identity theft might fall under your home insurance policy, as can spoiled groceries, which comes as a surprise to a lot of homeowners.
However, just because you can file a home insurance claim for something doesn’t mean that you always should. In some cases, even if you’re fully covered for a loss you’ve suffered, it might be better just to let it go and eat the expense yourself.
This guide covers home insurance claims, what they’re good for and what they aren’t, and when and how you might want to file one. More importantly, you need to know what losses should not be reported to a home insurance company and when it is or is not a good idea to file a claim. Sometimes filing an insurance claim for covered losses is a bad idea, and knowing when it is could save you thousands of dollars in higher premiums and deductibles.
What Is Home Insurance and Why Should You Have It?
If you own a home, you have a piece of property where bad (i.e., expensive) things can happen.
Homeowners insurance protects your investment with a policy that will pay out in the event of damage, loss of valuable property or liability, such as when a burglar breaks your window, steals your water heater and slips on a banana peel on the way out the door. If anything bad happens to or on your property, you might have a home insurance claim that can help pay for the cost of repairing the window, replacing the heater and nursing the burglar back to health at the hospital.
Insurance is so basic to protecting a home that it’s nearly unheard of for mortgage companies to lend money for a house without requiring you to carry insurance for the entire life of the loan.
What Does Home Insurance Cover?
Home insurance policies vary a bit from one company to the next and from one state to another, but all of them are good for certain minimum coverage. As a rule, your home insurance policy should cover damage to the structure caused by accidental fires, excessive wind, hail and other weather events. The standard policy does not typically cover damage due to floods or earthquakes. Those cost extra and come as separate plans you can attach to the main policy.
Your insurance is also likely to cover losses caused by damage or theft of items inside the home or even things that are sometimes inside your home. Your phone, for instance, can be included in a homeowners’ policy, even if it gets stolen from your car while you’re at work. Very high-value items, like a million-dollar painting in your living room, are probably not covered and require a separate insurance policy.
Home insurance usually goes beyond structures and items you own and will likely cover certain liabilities you incur as the property owner. Visitors injured on your lawn, for example, might claim damages and medical costs arising from tripping over a garden hose you left out. The water pipes can freeze and burst, flooding the neighbors’ yards. High winds can knock over an old tree on your property and take out the neighbors’ car. Assuming your policy is structured right, most of these unexpected problems can be paid out of your homeowners’ insurance.
What Does Home Insurance Not Cover?
As noted above, the standard policy doesn’t protect you from earthquakes or floods, and it’s a fair bet you’re not protected from damages incurred during a riot, war, revolution or asteroid strike. Extreme events can cause enormous damage to a whole community, and insurance companies manage the risk by the novel expedient of not paying for them. While you might be able to buy a special policy for flood or quake damage, basically, everything else is a unique issue you have to shop around for if you want coverage.
How Do You File a Home Insurance Claim?
Filing a claim isn’t usually hard to do. If you’re out of danger and can safely use a phone, call your insurance company immediately after the damage. If you have a fire or a threat to safety, call 911 for fire or police first, but remember to call your insurance and file a claim right afterward. The sooner you get your claim in, the better your chances of collecting it.
When You Should and Should Not File a Home Insurance Claim
As a rule, you should file a home insurance claim any time damage, theft or liability is too expensive for you to fix on your own. Insurance is there to take the edge off of mishaps that could drain your resources. Anything serious enough to get to that level is probably a good candidate for a claim.
When Is Filing a Home Insurance Claim a Bad Idea?
Your insurance policy probably comes with both a monthly premium and a deductible. The deductible is the amount of money you’re on the hook for yourself before your insurance coverage kicks in. Insurance companies generally recommend getting a deductible of $500, though you might get up to a 25% discount if you opt for the $1,000 deductible option. This is important because you don’t want to file a claim for anything less than the deductible will cost out of pocket.
Say you have a $1,000 deductible and a teenager-related driving mishap leaves a hole in the drywall of your garage. If replacing that section of wall costs you $200, you’re better off not calling the insurance company. If you file a claim, you’ll still wind up on the hook for the total cost of the repair. Even if you’re close to the deductible limit, you might decide against filing a claim. A second driving mishap that leaves your garage door with $1,200 in damage, for instance, will still cost you $1,000 for the deductible, and the $200 the insurance company pays will count as a claim.
Every claim you file signals your insurance company that you’re the kind of customer who files home insurance claims. This can result in higher premiums that cost you way more over time than just paying for the damage yourself would have. You’re probably okay if you don’t file more than one claim every three years since that’s usually priced into home insurance plans. Anything more frequent than that, however, could lead to a rate increase or even denial of future coverage.
You might also be interested in: What Homeowners Insurance does not Cover