By Paul Bianchina
It's
an unfortunate fact of life that bad things can occasionally happen to your
home. Water damage from a broken pipe or a fire from an overheated stove can
happen at any time, and can easily cause tens if not hundreds of thousands of
dollars in structural damages and contents losses.
That, of course, is why
you have homeowner's insurance. But the question that often comes up is "Should
I file a claim?" It's not always an easy one to answer, and there are several
factors you need to weigh before you make that decision.
IS IT A COVERED
LOSS?
The first question that comes up is whether the loss is covered by
your homeowner's policy. Generally, the policy will stipulate that the damage to
the home needs to be "sudden and accidental." Some examples would be a pipe that
freezes and breaks; a washing machine or a toilet that overflows; an electrical
circuit that overheats and starts a fire; a wind storm that causes shingles to
blow off the roof or a tree limb to come crashing down; or a drunk driver that
misses the corner and smashes into the front of your house.
Things that are
typically not covered include ongoing maintenance issues, such as a plumbing
drip that has gone on for many months or shingles that fail because they are
past their useful life. Flooding and earthquake damage are typically not covered
unless you have specific coverage on your policy, and many homeowners' policies
now either exclude or limit coverage for mold.
WHAT'S THE VALUE OF THE
LOSS?
Another key question about whether or not to file a claim is the
value of the loss. Some people view their homeowner's policy as something to be
used for a loss of any size, while others view it in the same vein as a
major-medical insurance policy -- it should be used only in the event of
something catastrophic.
Every homeowner's policy carries a deductible amount,
which is a sum of money that you are required to pay toward the value of the
loss. For example, suppose your home is damaged and the contractor will charge
$10,000 to repair it. If you have a $1,000 deductible on your policy -- a fairly
common amount these days -- the insurance company will settle with you for
$9,000, and you will have to make up the other $1,000 of the contractor's bill.
The size of your deductible contributes to your thinking on whether or not you
want to file a claim. If you have a loss that is valued at $1,200 and you have a
$1,000 deductible, the $200 that the insurance company would contribute toward
the repairs would not be worth having a claim on your record. On the other hand,
a $1,000 deductible would be a minor contribution to make against a major fire
damage claim that resulted in $75,000 worth of damage.
You will need to weigh
the value of the loss against your own financial situation and the impact that
the claim will have on your record before you make the final decision to file a
claim.
WHAT ABOUT CLAIM HISTORY?
Many people hesitate to file a
property damage claim due to concerns about their "claim record," which is the
history of claims that have been filed against a particular piece of property.
In general, insurance companies look at the number of claims filed against a
piece of property in the last three to five years, the nature of those claims
(fire, water, storm, etc.), and the dollar value of the claims.
Different
insurance companies seem to have different criteria for how they view claim
history and how they weight the different factors, but all of them do take the
property's history into consideration in one way or another when it comes to
rates and whether you will be eligible for renewal when a policy expires.
Remember that this is typically the record of claims filed on a particular
piece of property, not claims filed by a particular person (although that may be
taken into consideration as well). As such, you may be filing your first-ever
claim on the house you've owned for the last two years, not realizing that there
had been two previous claims filed by the last homeowner. For that reason, when
you purchase a previously owned home, it's a good idea to ask for a disclosure
of any claims that have been filed against the home.
DON'T BE AFRAID TO
ASK
Filing a claim is not something to do casually, or to do on a loss
that is not very much over your deductible. On the other hand, you shouldn't
feel like you need to shy away from a claim if you need the insurance company's
help in making the necessary repairs -- that is, after all, why you have the
policy.
Unfortunately, the typical insurance policy is not written in plain
English, so it may be difficult to understand what is and isn't covered. There
is also nothing in the policy about how claim history affects you. So, if you
have any questions about coverage, deductibles, claim history or anything else
pertaining to how well your single biggest asset is protected, don't ever be
afraid to ask your agent for clarification.
Copyright © 2007 Inman News - Paul Bianchina
You
want the home you buy to include certain features, but you're not likely to find
all of them in one house for the price you'll be willing to pay. You can
compromise on location, home features such as size, condition, price, or all of
these. Just make sure that the tradeoffs you make are carefully considered and
that they don't compromise your quality of life.
Equal Housing Opportunity