When Should You Use Your Homeowners Insurance?

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In the event that an accident or emergency causes damage to your home and/or personal property, relying on your homeowners insurance coverage may seem like the most obvious course of action. But there are circumstances in which filing an insurance claim may not be in your best interest, and can even cause you more financial harm than help.

What homeowners insurance usually covers

Homeowners insurance provides coverage for liability, your dwelling and its essential structures, and your personal property in the event of an accident or emergency. Should anything within your home incur damage and need to be repaired or replaced, your homeowners insurance should provide you with financial reimbursement for the cost, assuming your deductible has already been paid and that the damage is a result of a covered loss.
Most standard homeowners insurance plans will reimburse you for damages caused by:
  • Fire/lightning
  • Smoke/ash
  • Volcanic eruptions
  • Explosions
  • Riots
  • Windstorms and hail
  • Damage from aircraft
  • Damage caused by vehicles
  • Vandalism
  • Theft
  • Falling objects
  • Weight of ice, snow, and/or sleet
  • Water overflow or discharge (plumbing, air conditioning, and other appliances)
  • Freezing of household systems
  • Power surge damage
If you have any questions about your coverage plan or any of its terms, be sure that you reach out to your insurance provider so that you stay fully informed and ensure you utilize policy to its maximum benefit.

When should you file a claim?

Though homeowners insurance exists to keep your finances protected in an emergency situation, reporting an incident to your insurance provider often comes with its own set of long-lasting financial repercussions, such as an increased premium. Before filing a claim, you should first assess the situation and determine whether receiving reimbursement is likely or even possible.
If the damage is caused by a named peril, occurred through no fault of your own, and will cost significantly more than your deductible to fix or replace, you should file a claim with your insurance provider because you are almost guaranteed to receive benefits.
If there is severe damage and/or injury, you must file a claim with your provider so that you are not held liable for the cost of physical damage and/or the medical expenses of anyone who was hurt at the scene.
If the cost of repair exceeds your deductible, you should consider filing a claim with your insurance company to reduce the amount of money you have to pay out of pocket to cover the cost of damages and/or repairs. After you have met your deductible, your insurance provider will cover the remaining cost of damages (until you reach your policy limit), so the more expensive the claim, the more money your policy will save you in the moment.

When should you not file a claim?

Despite the essential protection homeowners insurance provides, these policies commonly contain terms that set you at a financial disadvantage after utilizing your benefits. Therefore, it is crucial that you understand when your insurance will not cover the cost of damages before filing a claim and risking your financial future.
If the damage is a result of expected wear-and-tear, your insurance will not reimburse you for the cost of any repairs. Homeowners are always held liable for the breakdown of equipment within their home (unless they have taken out specialty coverage, so filing an insurance claim would only waste your time and increase your bill.
If you have filed multiple claims within the past five years, it may be in your best interest to withhold from reporting another incident to your insurance company. Policyholders who file claims often are more likely to be seen as high-risk clients, a huge red flag that will certainly impact your insurance rate. Your insurance history is reported and maintained on your Comprehensive Loss Underwriting Exchange (CLUE) report, a database of information in which all major insurance companies have access, so be sure that you first consider the severity of the situation before filing another claim and negatively impacting your record once more.
If the damage is cosmetic or minimal, you should not file a claim with your insurance company, as the pay-out you receive (if any) will not be worth both the hassle and the negative financial repercussions that come with it. It’s a good idea to only report essential, as opposed to aesthetic, damages to keep your insurance record clean and your premium low.

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