Your home insurance policy is there to protect you when you need it most — but you may find yourself wondering what could happen to your premium after you make a claim. As your HMS insurance broker we will provide helpful insight on how your claim will impact your policy, and provide the right course of action to get your home back in the same position it was before. Consider the following items before filing an insurance claim.
Many insurance companies offer claims-free discounts (5-20%) that reduce the cost of your home insurance if you haven’t made any claims, or if you’ve been claims-free for a set period of time. If you’ve been benefiting from a claims-free discount and find yourself making a claim, you could lose out on that savings — the good news is your discount could be reapplied in the future if you remain claims-free for the amount of time set out by your insurance company (often 3 years).
Consider this situation, you are currently benefiting from a claims-free discount that saves you $300 a year. Your insurance company awards this discount if you haven’t filed a claim in three years. Would you file an insurance claim if the damage is only $800, when the loss of your claims-free discount will cost you $900 over 3 years?
The number of claims you make in a given period of time (frequency of claims) can result in changes to the cost of your insurance or maybe even your coverage. After you’ve made several claims, you may have an extra charge added to your premium to offset the cost of processing your claims. Your policies protection will usually far outweigh this type of surcharge should you find yourself needing to make another claim, and depending on your payment plan, the surcharge will likely be divided up and paid over time (monthly withdrawals) rather than in a lump sum, just like your existing premium.
How do surcharges work? Picture this: You’ve made a few home insurance claims and your insurer decides to add a 10% surcharge to your premium, which adds up to $200 for the entire year. A few months later, a flood in your basement causes $20,000 worth of damage. When you submit a claim for the flood, your insurer agrees to pay for the repairs (minus your deductible), meaning you don’t have to empty your bank account to dry out your basement. In this case, that extra $200 really was a small price to pay to prevent a much larger financial loss.
Sometimes accidents happen, and that’s exactly why you have insurance. However, your insurance company may have a certain tolerance for claim frequency. If you find yourself filing several insurance claims in a given year, your insurance company may decide to not renew your policy for another year. As a result your only option may be to switch to a high-risk insurance company, and it usually comes with a higher price tag as you can imagine.
If you find yourself in a claim situation please contact your HMS broker. We are here to help you understand what happens before, during, and after a claim – and we’ll advocate for you every step of the way. If however, you are experiencing a claims emergency, and its not during our business hours, please visit our claims page to get information and 24/hr claims numbers.