The Cost of Putting through a Home Insurance Claim

Everyday we all get to hear intriguing things either from co-workers or clients. One of the things I hear often is confusion about home insurance and putting through a claim. Whether you own your home or rent, the effects can be the same.

Let's first look at the rating(pricing) for your insurance. Insurance companies come up with a rate for each individual risk and then they take that number and apply discounts that the individual and risk qualify for.
So for ease, let us look at the claims free discount. This discount can range from 0% to 25%, depending on the insurance company you deal with. so if your insurance premium is $800.00 and you have a 20% claims free discount your actual rate would be $1000.00.

So you have a claim on your home, let's say a tree falls and destroys your shed. To replace this shed will cost you $1000.00. You currently have a $500.00 deductible on your policy, so at this point your claim to the insurance company is worth $500.00. The insurance company will honor the claim if it is covered under the policy.

Here is the downfall, that your BROKER will tell you! If you put a claim through on your policy you will lose your claims free discount! If you have this discount, say for the above example, your insurance premium will increase 20% because you no longer qualify for the discount. Some companies require 3 or 5 years claims free before you can get the discount back. Now the $500 claim you will put through to the insurance company is costing you at least $100.00 or possibly more, spread over 3 years.

So before you put a claim through your insurance policy educate yourself and know the full effects that will happen.

I look forward to hearing any comments or feedback.

Thank you for reading.

Sean McNamara