There was a time when people would become homeowners towards the fag end of their professional life. Not anymore. Things have changed drastically over the last couple of decades or so and we’ve many homeowners who’re not even out of their 20s thanks to the easy availability of home loans.
Whether you become a homeowner post retirement or early on in your adult life, there’s no denying the fact that you worked hard for it. You toiled to buy the house of your dreams and then toiled some more to turn it into your cozy cocoon, your comfort zone, a place in this world that is just yours. You worked to turn in into a home.
Obviously you’ll want to protect it with dear life. You want to protect it from natural forces. You want to protect it from accidental damage. You want to protect it from financial uncertainty. You want to protect it from liability.
I mean, if it weren’t for our deep-rooted need to protect our home, carriers like The Hartford Homeowners’ Insurance, Statefarm, Progressive, etc. won’t be thriving today right? And I’ve just named a few from the top of the pile here.
Yes, insurance – that thing we pay to buy peace of mind and security from the vagaries of life. I know all of us are smart investors and wouldn’t dream of leaving the house of our dreams uninsured, so what exactly do you think I am rambling about?
I am talking about the times when it makes sense to not use the home insurance, however tempting the thought or idea may be.
Claims can spike your premium
I know you’re probably debating the logic behind the statement above and I don’t blame you. The only reason we buy insurance is so we can use it when the need arises without having to worry about spending from our pockets.
So we go and make an insurance claim unmindful of the impact it will have on our premiums going forward. In case you didn’t know, filing a claim can sometimes work against you. Believe it or not, filing a claim on your home insurance policy can sometimes lead to a 20-40% increase in your premium.
Now, wait a minute. Isn’t that a lot to pay for using a product the way it is meant to? So while logic may tell you to use your insurance if your roof needs repair or your dog has extended a rather unkind welcome to the delivery guy landing you in a civil suit, you need to stop and think if that’s really the course you want to follow.
Here’s why: when an insurance carrier is assessing your risk factor to determine your premiums, things like the size of your home, your neighborhood, age of construction, geographical location, etc. are taken into account. Another factor that plays ahuge role in determining whether or not you present a high risk for carriers is your claims history.
The more claims you’ve filed, the higher will be your risk factor and the costlier will be your insurance. What’s more, there are certain types of claims that can boost your premiums more than others and these include dog bites, slip and fall claims, and water damage. Who would’ve thought your canine friend would come back to bite you (pun unintended) where it hurts the most – your pocket?
But that’s not all the damage a claim can do, even the denied ones (I am not kidding. Next time you think all you’re doing is making an innocent inquiry, make sure it doesn’t enter your file as a potential claim request).
Filing repeated claims can also put your name in a database (the kind you don’t want to be on) that may lead to coverage loss and even make it difficult for you to obtain new insurance. So, you really have to weigh the pros and cons of filing a claim and do some serious number crunching to determine if it will cost you more than you get back.
Buying home insurance is non-negotiable in my books. What needs to be negotiated is the wisdom in filing every single potential claim.