When Should You File a Home Insurance Claim?

Home insurance provides financial protection against unexpected damage to a home and its contents, covering costs from perils like fires, storms, or theft. This article guides you through determining whether to file a home insurance claim and what to expect.

Understanding Your Home Insurance Policy

A standard home insurance policy includes core components to protect your property and finances. Dwelling coverage protects the physical structure of your home, including attached fixtures like a garage or deck. This coverage amount should reflect the cost to rebuild your home, rather than its market value.

Personal property coverage extends to your belongings inside the home, such as furniture, electronics, and clothing, and sometimes items temporarily removed from the property. While a general limit, often 50% to 70% of your dwelling coverage, applies, valuable items like jewelry or fine art may have specific sub-limits. Inventory your possessions to assess if additional coverage is needed.

Liability coverage protects you financially if someone is injured on your property or if you accidentally cause damage to someone else’s property. This coverage helps with legal fees, medical expenses, and potential settlements. While minimum liability coverage often starts around $100,000, higher amounts, such as $300,000 to $500,000, are recommended to align with your overall assets.

A deductible is the amount you are responsible for paying out-of-pocket before your insurance coverage begins to pay for a covered loss. Deductibles can range from a fixed dollar amount, commonly between $500 and $2,500, or a percentage of your dwelling coverage. Choosing a higher deductible typically results in lower annual premiums, but it also means greater initial financial responsibility in the event of a claim. Policies also come with coverage limits, representing the maximum amount your insurer will pay for a covered loss.

Key Considerations Before Filing a Claim

Before filing a home insurance claim, evaluate factors to determine if it is financially prudent. Compare the estimated cost of repairs to your policy’s deductible. If the damage cost is only slightly above or even below your deductible, filing a claim may not offer significant financial benefit, as you would be responsible for that initial amount.

Filing a claim can lead to an increase in your insurance premiums upon policy renewal. Insurers assess risk based on your claims history, and a claim can signal a higher likelihood of future claims. The increase could range from 7% to 20% per claim, depending on the severity and type of loss.

Your claim history is tracked in industry databases, such as the Comprehensive Loss Underwriting Exchange (CLUE) report. This report details claims made on a specific property over the past five to seven years, regardless of who owned the home. Insurers utilize CLUE reports when underwriting new policies or renewing existing ones; multiple claims, even small ones, can affect future insurability or lead to higher rates.

Confirm that the damage resulted from a peril covered by your specific policy. Home insurance policies include various exclusions, such as damage from floods, earthquakes, pest infestations, mold, or general wear and tear, unless specific endorsements are added. Water damage from a burst pipe is usually covered, but damage from natural flooding or water seeping from the ground typically requires a separate flood insurance policy.

Steps to File a Home Insurance Claim

Once you decide to file a claim, contact your insurance provider as soon as possible. This can be done via phone, online portal, or mobile application. Prompt reporting helps expedite the claim assessment.

Document all damage before significant cleanup or repairs. Take clear photos and videos from multiple angles, capturing the extent of the damage to your home and personal belongings. Create a detailed list of all damaged or lost items, including descriptions and estimated values.

Take reasonable steps to prevent further damage to your property, such as covering a broken window or placing a tarp over a damaged roof section. Keep all receipts for any temporary repairs or related expenses, as these may be reimbursable as part of your claim. When contacting your insurer, be prepared to provide your policy number, the date and cause of the loss, and a detailed description of the damage. After you report the claim, the insurance company will typically assign a claim number and an adjuster.

What Happens After Filing a Claim

After you file your claim, the insurance company begins its assessment. An insurance adjuster will inspect the damage, review your policy, and evaluate the cause of the loss to determine coverage. This assessment helps prepare a written estimate for the cost of repairs or replacement.

Following the assessment, your insurer will provide a settlement offer based on their findings. This offer will reflect either the actual cash value (ACV) or the replacement cost (RC) of the damaged property, depending on your policy. ACV accounts for depreciation, meaning you receive the depreciated value of your items, while RC pays to replace or rebuild with new materials or items without deducting for depreciation.

Many policies initially pay out the actual cash value, with the remaining replacement cost paid once repairs are completed and receipts are submitted. Once settlement terms are agreed upon, you can proceed with the necessary repairs. Payments for structural damage are often issued in two checks: an initial payment, and a second payment upon completion of repairs. Your claim will then be closed.