Last night I had a overflowed washing machine, which drenched the carpet and also leaked downstairs to the kitchen (ruining a light fixture in the process) and from there down to the basement. The appliance guy suggested that we should claim it against insurance.
What makes us nervous is that insurance companies can raise your rates a lot (or even cancel your policy) for making claims, and the claims go into a database that can be used by other companies. Some websites I’ve looked at say that one claim won’t have an impact and some say that even one can, but even if the former are correct, you could have problems if you then tried to file another claim later.
The bottom line is that it’s not worth filing a claim unless it’s a pretty big claim. We have a $1,000 deductible, and I’m thinking if the assessed damage is something like $1,300 it’s not worth it. If it’s more like $4,000 then it probably is.
Here’s the question. My wife already reported this to insurance, before we thought all this through. What I want to know is what counts as a “claim”, for the above purposes. Suppose we call the company back and say never mind, just forget the whole thing - does that mean we’ve not made any claim, or does it count as a claim since the insurer already knows about it? How about if we let the adjuster come down and tell us what he thinks it’s worth? Can we use that information as the basis for our decision as to whether we “file a claim”, or is it too late by then, and if he says “the damage is $1,001, so you get $1 over your deductible” (or possibly even if it’s less than the deductible) we’re locked into having filed a claim and need to live with the prospect of future rate increases for little gain?
My wife actually asked the insurance guy she spoke to about this issue, but he said didn’t think it was a problem but he didn’t know (and frankly sounded quite believable as to the latter).
Since you have involved the insurance company you have a claim, whether you get any money from them or not. You can’t undo this now as far as I know from my experience.
Look up “zero dollar claim”.
When buying my current house I found out about this the hard way. I told the insurance guy I had no prior claims and got a policy through Farmers. A couple of weeks after closing he called to tell me my policy had been cancelled because I had two zero dollar claims.
One was that my truck had been broken into and I reported it to Nationwide. Glass damage was less than the vehicle deductible and the property stolen would be against my home owners policy, so also less than that deductible. Zero dollar claim.
The other was for a house I hadn’t lived in for about a year. The ex reported some minor water damage around a window, also to Nationwide. She then got an estimate for repair which was less than the deductible. Called Nationwide to say nevermind and got it fixed on her own.
So another zero dollar claim, which counted against me too since my name was still on the mortgage.
I was then considered “high risk” and could not get a normal insurnace policy for my new house. My policy with Farmers was going to be around $800. The best I was able to get after they cancelled me was about $1500. Other quotes I got were around $2500 to $3000.
Because of two zero dollar claims.
My insurnace broker told me to always call him first about a potential claim and he would advise me whether to involve the actual insurance company. Once they are involved, it is a claim.
I’d be careful about that, too. I had a situation many years ago in which I had filed a couple of claims within a period of several years (one was for damage from a hurricane, I forget what the other was), and the broker requested that the insurance company cancel my policy. Apparently they are somehow affected by the number of claims as well.
Also bear in mind this is not subject to national regulation. Each state s free to have its own rules on the topic. Or not.
And each company is free to have its own rules within those allowed by the state. This also means that a national company, e.g. Farmer’s, might well have 20 different policies in place across the 50 states to accommodate all the combinations of state-level regulation.
So a truly factual answer to the OP’s specific question would require knowing both the state and the company involved.
Over here this applies more to motor policy claims than homeowner’s. Even the innocent victim of a rear end shunt may well have his premium bumped on the grounds the he is supposedly a higher risk. A poster on another forum phoned his insurer when he scraped a post but made no claim as the car wasn’t worth it. He got in trouble when he switched insurers and failed to disclose his accident.
My house insurer is more friendly. When I had a large double glazed window broken, I phoned them for advice. My excess (deductible) is £250 and the quote for the glass was around £200. The CS guy on the phone told me that they would ignore it.
Although it may seem “unfair”, all of this is just about them trying to assess risk - so turn the tables, and imagine what attitude you would take if you were effectively underwriting the risk. If your teenager borrowed your car, and told you that he had a near miss but just managed to avoid a collision, it’s common sense that you’d be more wary about lending him the car again.
It’s a common misconception that after a claim and payout the insurance company raises rates to try to “recoup” that money. That money per se is gone and irrelevant, the premium is based on estimated future risk. So the higher rates derive from the improved data that the company has about your riskiness, not the dollar payout. If you made a $3,000 claim in the past, it would make no difference whether if your deductible at the time were $1,000 (you actually got paid $2,000), or if your deductible were $5,000 (a zero-dollar claim) – the data deriving from that claim about your future riskiness is the same.
The only way to stop the insurance company from potentially raising your rates is to withhold the data. Although, of course, you must make sure that you don’t withhold information that you are obligated to disclose, or your policy may be invalid.
One other issue to consider: if your claim is below your deductible, you might still consider making the zero-dollar claim, since it uses up some of your deductible. Otherwise, if you have a second claim in the same year, you still have to subtract your entire deductible - you can’t say: oh, three months ago this happen too, but we didn’t tell you.
The system that this gets reported and detected in is called Comprehensive Loss Underwriting Exchange (CLUE) at my agency, but others use different ones. Even if no claim is filed if there is noted damage it can be reported in the CLUE system, but this varies by state. It’s like a credit report for a property. In my state, CA, items in a CLUE report last 7 years.
Here is info from Wisconsin that came up in my brief search:
My understanding is that deductibles on homeowners’ claims are taken per incident, not per year. If you have a $1500 claim with a $1000 deductible, the policy pays $500. If you have a similar claim for a different incident a month later (but within the same year), you get hit with a new deductible and still only receive $500. Is that not the case?
I just checked my policy, and you are correct. And from a quick google, it looks like that you are correct that it’s a general rule in the U.S. is that homeowners and auto deductibles are per incident, whereas health insurance deductibles are per year. Ignorance fought.
I hope that my insurers are reading this – obviously my ignorance on this point illustrates my (lack of) claims history.
It seems stupid but it is the way them cheatin’ bastards have this set up … filling “frivolous” claims just pisses them off … if you have a loss that will bankrupt you … fill a claim … otherwise just pay it out of your pocket … seriously, too many little claims will get you to be uninsureable … for the $4,000 you may find yourself better off just paying it … save the insurance for when your house burns to the ground.
I’ve been told never fill a claim for water damage … just don’t … insurance agents are there to protect their stock holders, not you …
I’m totally sympathetic to situations where dishonest insurance companies refuse to pay out claims based on technicalities and small print that are contrary to reasonable prior expectations.
But not to people being annoyed at the premiums that private insurance companies ask for forward-looking risk in a competitive market. If you don’t like one company’s price, ask another one - and if they are all high, there’s a reason. Insurance actuaries are highly sophisticated, their job is to take risk to make profit, but no private company owes you insurance at any rate other than one that they judge to have a positive expected return.
The situations where people genuinely have a right to feel upset that the system is against them are where their situations are sufficiently unusual that the actuary doesn’t have a large enough sample size to quote a price close to the expected return. I’d certainly favor government stepping in to help such people out, but in the U.S. that would probably label me a communist.
I understand my premium going up if I file claim when my house burns down … what I don’t understand is why my policy is cancelled after a couple three “zero dollar claims” … why this should go on my permanent record so that no company will insure me … what does this do with actuaries? I pay X dollars, receive back zero dollars, how am I some overly risky client?
See my post #8 above. The data point that predicts future risk is the loss that occurred. It’s not relevant who paid for that loss - that is simply a function of the deductible size on the policy that was in place at the time. No rational insurer is concerned about the historic profitability of a specific client, they are concerned with what historic data tells them about the future risk of a specific client. This is precisely what actuaries assess. Unfortunately, certain loss histories or other circumstances may just shift you into an “unusual” group where they just don’t feel that they have a large enough sample size to assess the risk accurately.
I spoke to a person at MetLife who said if I decide to forgo any claims, ML will not raise the rates, although if I switched carriers another carrier might reflect even a zero dollar claim.
In any event, the adjuster was just here, and - to my considerable surprise - her assessed value of the damages is about $6K, which minus the deductible is $5K, and with the possible subtraction of about $600 for depreciation (I’m not sure if they want to subtract this or not) ends up at about $5K or $4.4K.
I’m currently paying about $1,100 per year in premiums. I’m thinking that it’s worth taking the money. But I’d be curious as to whether anyone disagrees.
One side note is that I also have insurance on an investment property with the same company. I don’t know whether the rates on that policy are affected by claims against this one. Hard to imagine that it is, because that would imply that anyone who owned enough properties would be effectively foreclosed from making any claims at all on any of them. But I don’t know.
Apparently the way it works is that if you actually do the repairs, they give you back the depreciation amount. If you just pocket the cash, they don’t. Interesting.
Therefore you are a Very Bad Person and must be avoided at all costs :(.
Multiple claims might mean you live in a high risk area, or whatever, but their models show that someone who files a number of claims - even ones that don’t pay anything - is more likely to file claims in the future - some of which WILL probably cost something.
We ran into this when we bought our current house in 2002. We’d had two claims a couple years earlier: one when a heavy windstorm blew down our chimney (metal pipe through roof of townhouse), one when my husband’s car was broken into at work. We really, really regretted that second one, as the property taken wasn’t all that much, but the chimney damage was about 3,000 dollars and HAD to be taken care of immediately (as it was how the furnace vented, and we took the risk of CO poisoning VERY seriously).
The claims were in 2000. The insurer had renewed our policy once in the interim - but when we were getting set to move to the new place, they said “Uh, can’t write that policy, it has to go through underwriting review” because of the 2 claims.
If the chimney had been the result of something really major like a or other event that was truly newsworthy, it wouldn’t have counted.
I called other companies and one said “Well, hopefully your company will decide to cover you after all because nobody else will”. We were looking at having to go through one of the high risk plans that would have covered the house and nothing but the house, and for a LOT more money. For two claims that were clearly not likely to recur.
Fortunately, the insurer did decide to write the policy - they looked at the fact that I’d been a customer for over 20 years at that point.