Do not rush to file these claims.
- Property damage can sometimes be minor in nature.
- Before you rush out to submit a claim against your home insurance, be sure to do some math.
The purpose of home insurance is to protect you, among other things, in the event of property damage. Imagine a storm hits and causes $15,000 in damage to your home. It’s money you may not even have in the bank. With a home insurance policy, you can simply pay a deductible – a fraction of the total damage – and ask your insurer to pay the rest.
But it doesn’t always pay to file a claim against your home insurance. Before you do, there’s an important question you need to ask.
Is the repair bill higher than my deductible?
You may be familiar with deductibles in the context of health insurance and auto insurance, and they also apply to home insurance. Home insurance policies have deductibles that can vary. Yours can be $500, $750 or more – it depends on the coverage you put in place.
Your deductible is the amount you must pay before your home insurance company covers the cost of home repairs. So, let’s say your property suffers damage and it will cost you $2,000 to fix it. If you have a home insurance deductible of $500, you will pay that amount and your insurer will cover the remaining $1,500.
The more claims you file against your home insurance policy, the more likely you are to see your insurance premiums increase over time. That’s why it’s important to file claims wisely. And in some cases filing a claim may not even make sense, for example if the cost of repairs is lower than your deductible itself.
So let’s say you’re looking at a $700 repair and your home insurance policy has a $750 deductible. In this case, filing a complaint is useless. And, if you’re considering an $800 repair with a $750 deductible, you might just want to cover that cost yourself rather than having to go through your insurance. This could mean getting the job done sooner and avoiding a scenario where you risk increasing your premiums.
What should your franchise look like?
In insurance, deductibles and premiums tend to have an inverse relationship – the higher one, the lower the other tends to be. If you feel that your home insurance deductible is too high, you may want to consider reducing it. But be aware that if you go this route, you might end up with higher premiums in return.
If you tend to file a lot of claims, a lower deductible might be worth it. But be sure to read the numbers carefully before making that call.
The age of your home may also factor into your decision. If you have a newer home, you may need fewer repairs (although that’s not always the case). In this situation, it might be beneficial to stick with a higher deductible and lower premiums. But if your home isn’t in the best possible shape, you might consider lowering your deductible, even if it means you’ll have to pay higher premiums.
Choosing the right home insurance to protect you
No matter where you live, insuring your home is essential to protecting your finances in the event of an unforeseen incident. Whether it’s a natural disaster, accident, burglary, or something that causes damage to your property, you want to know that you have the right home insurance coverage for your situation.