Home insurance premiums have been increasing, and obtaining coverage can be challenging in what's known as a "hard market." 

When extreme weather and catastrophic events put demands on the insurance industry, this reflects in premiums and renewals. Insurance companies take on less risk and increase their rates to keep pace with rising claims, litigation and higher material costs.

Insurance is an investment that you hope you never have to use. You’ve paid into a fund to protect yourself from unexpected events like theft, vandalism, outside liabilities and natural disasters. If you experience a catastrophic event, you can file a claim to help you recover from your losses. But what about smaller events that straddle the coverage line? They’re not disasters, but also not cheap.

Not every circumstance calls for filing a claim. Knowing when to file a claim on your home insurance can save you some stress (and possibly money, too) in the long run.

Your deductible

A deductible is how much money you’re expected to pay out of pocket toward a loss before the insurance company begins to cover the claim.

For instance, imagine your roof is damaged in a storm. You submit a claim, and the insurance company sends an adjuster to rate the damage. They rate the loss at $10,000 for a partial roof replacement. Your insurance has a $1,000 deductible. You’ll have to pay the $1,000 upfront before the insurance company pays the remaining $9,000.

Let’s go further with this example. Say you decide to replace your roof instead of repairing it. The roofer quotes $20,000 for a complete replacement. Your insurance company will only pay for the damaged portion of the roof. You’d still need to pay the $1,000 deductible to the insurance company. Your insurance company would pay $9,000 for the damaged portion of the roof. You’d be responsible for the remaining $10,000 to cover the undamaged portion.

Deductibles can vary depending on the policy, including the amount you chose when you signed your policy. A higher deductible can lower your annual premium, but you’ll have to pay more upfront if you make a claim. It’s important to consider how much your budget allows regarding deductibles.

Deductibles will factor into your decision to make a claim

There are a few instances where you may not need to pay a deductible when you file a claim:

Liability coverage helps if you’re sued and found legally responsible for someone else’s injury or property damage. Typically, there’s no deductible applied to this coverage.

Medical payments help if your guest is injured on your property, regardless of fault. Again, there is usually no deductible applied to this kind of coverage. Some home insurance policies offer medical payments as high as $5,000 without requiring an investigation.

Additional living expenses (ALE) help when you must temporarily leave your home while it’s being repaired or rebuilt because of a covered peril, like a fire. ALE pays for living expenses like hotel bills and meals. There isn’t a deductible for ALE, but you’ll likely pay a deductible toward the damage claim.

Sublimits and deductibles

Sublimits are coverage limits for certain property types or losses, like tree debris cleanup. Sublimits are the maximum amount your insurance carrier will pay for a named peril, regardless of the deductible.

Let’s say a tree falls on your shed during a storm and destroys it. Your home insurance covers replacing your shed up to 10% of your $300,00 policy, or $30,000. Your home policy deductible is $2,000. Your policy also has a sublimit of $3,000 on debris and tree removal for all trees, but no more than $1,500 per tree. 

The result here? Your insurance company agrees to pay for the cost of replacing your shed, minus your $2,000 deductible. But it pays only $1,500 for tree debris cleanup.

Talk to your Rathbun Insurance account manager about the specifics of your coverage.

To file or not to file a claim?

Big-ticket items and disasters

Insurance is a lifeline if a catastrophe results in a loss far beyond what you could comfortably manage out of pocket.

• In cases of severe damage or property loss that exceed your deductible by a significant margin, filing a claim makes sense.
• A claim can also help with legal repercussions when liability issues arise, like your dog biting someone or you accidentally damaging someone else’s property.

Small stuff

Filing too many claims makes you appear risky. Thus, insurers are less inclined to renew your policy. That’s why it’s vital to assess every situation independently and decide if a claim is the best course of action.

Sometimes, filing a claim may do more harm than good.

• If the cost of repairs is just a little above your deductible, consider paying out of pocket. The potential rate increase post-claim may cost significantly more in the long run.
• Frequent minor damage claims can also cause scrutiny. Occasional minor damages are part of homeownership. It’s essential to understand that insurance isn’t a maintenance contract. Overuse can lead to higher premiums or even nonrenewal.
• Insurers often offer discounts for a claim-free history. By filing a small claim, you may lose out on these benefits.

There’s no rule about when you can file a claim. There’s also nothing stopping you. Weigh your options. Call your agent before submitting anything directly to the carrier if you’re undecided. They’ll give you advice and run the options with you.

What might trigger a nonrenewal

Insurance companies look for reliability in their clients. Inconsistencies and risky behaviors could lead to a nonrenewal:

Frequent claims: Submitting multiple claims within a short period or making claims soon after starting a policy can be red flags for insurance providers; you can start to look like a high-risk client.

Type of claims: If the claims are due to recklessness or negligence, like regular claims for damage due to lack of maintenance, the insurer may deem you a liability.

Changes in your risk profile: Acquiring high-risk pets or increased crime in your neighborhood can impact your insurer’s decision.

Payment issues: Habitual late payments, missed payments or bounced checks can make you a less attractive client to insurers.

Home maintenance issues: Insurance companies use drones and satellite imagery to investigate claims. Some are using this technology to check for property maintenance issues, like an aging roof or overhanging trees. You could be faced with a nonrenewal if your home is showing signs of disrepair, even if you didn’t make a claim.

Changes in your insurance carrier’s appetite for risk: Sometimes, an insurance company decides to rework its client portfolio because the market is too risky. This can lead to nonrenewals. For example, a carrier might reduce coverage in regions prone to natural disasters.

If your insurer decides not to renew your policy, they must provide you with written notice before your policy expires to give you time to shop around. The nonrenewal letter must include specific reasons for the decision.

Work with your account manager

No one can guarantee an outcome at renewal time. Even people who have never filed a claim with their insurance company have been denied renewals. Others have had several claims and maintained their coverage without issue. 

Ultimately, you’ll need to decide what works best for you. Your account manager can help you sort your options and make the best decisions.