What happens if I file a claim from my home insurance?

Home insurance is a must for every home owner.  As the home is our most important material asset, we need to make sure that we have the resources to count on if the home gets damaged and needs rebuilding or repairs.

In the last few years, the cost of home insurance has risen significantly.  Reasons behind the increase include the increased cost for rebuilding and the increase in insured damages resulting from extreme weather conditions.

Rising Insurance Claims due to Extreme Weather

The Insurance Bureau of Canada reported that claims due to weather damage rose from $600 million in 2006 to $1.2 billion in 2012.  That’s a 50% jump in just 6 years.

Massive floods in Alberta in 2013 and torrential rains and ice storms across Quebec, Ontario, and the Atlantic provinces have resulted in property damages of over $3 billion.

These trends have a negative impact on both insurance companies and consumers as they drive up the cost of home insurance premiums.

Common Events Covered by Home Insurance

Home insurance covers damage caused by perils that include the following:

• Fire
• Hail
• Lightning
• Windstorms
• Vandalism

Damage from flood and earthquake are not usually covered. It is possible to have coverage for flood and earthquake as an additional cover. Depending on your insurer, you may have a separate policy for other perils.

Your home insurance will also have cover for contents in your home.  Also called personal property insurance, this covers your belongings such as furniture, clothing, electronics, and other items, whether they get damaged while in your home or outside.  Personal property insurance also covers losses due to theft.

Actual Replacement Cost or Cash Value

Personal property is usually replaced based on cash value at the time of loss and not more than the amount needed to repair or replace a damaged item.  There may also be a deduction for depreciation.

Keep in mind that with certain policies, there may be limitations to the cost of replacement for items like fur, jewelry, and collectibles.

Some insurers provide actual replacement cost which provides for actual cost to replace the item with a brand new one with no deduction for depreciation.  Naturally, policies that provide actual replacement cost may have higher premiums.

Actually, there are many things a home insurance can cover which you may not know about. Check 9 things covered by home insurance you should know.

To File or Not to File a Home Insurance Claim

It’s easy to understand that most homeowners feel they should benefit from their home insurance. After all, paying insurance premiums is a sacrifice and the cost can run up to thousands of dollars a year.

It can be very tempting to claim on your home insurance to justify the high cost of premiums.  But believe it or not, filing a home insurance claim is not always a good thing.

A good rule of thumb is to assess the amount of the loss or damage and to consider if the expense is something you need to claim. If it hurts your wallet and is considerably more than your deductible, it is worth filing a claim.

Protection you Don’t Want to Use

Consumers pay for building insurance to protect the structure of their homes and contents insurance for belongings in the home.

When it is time to file a claim, nobody feels happy because it means something bad has happened –  burglary, fire, flood. It means you suffered a loss of some kind and of course, this is something we all want to avoid.

Damage could also be a result of an accident or extreme weather conditions.

Insurance companies will cover specific losses as provided in your policy.  When you sustain some damage, it is important to review your policy’s terms and conditions to check:

• ✓ If the damage is covered;
• ✓ The amount of your deductible;
• ✓ The period provided that you can submit your claim;
• ✓ Procedures of the insurance company for filing a claim.

Before filing a home insurance claim, it is important to understand the following:

1. Any claims you make will have an impact on your insurance premiums during renewal;
2. You could lose your homeowner’s discount for no claims history
3. The amount of your claim may be just a bit over your deductible amount and won’t justify the negative impact on your insurability.

For instance, if your deductible is $500 and you are claiming damage for $700, your insurance company will only reimburse you for $200.  You may be paying higher insurance premiums over the long term compared to the $200 you saved.

When considering whether to file or not to file a home insurance claim, you’ll need to give some thought to other factors outlined below.

Consequences of Filing a Home Insurance Claim

You look at the front of your house and you feel totally annoyed by the damage to your roof from a felled tree.  Now this is damage you can’t ignore; it needs to be fixed right away.  The cost of repairing the roof could easily run up to $2,000.

When you obtained your home insurance, you wanted to keep your home insurance premiums down so you opted for a deductible of $500.  If you file a claim for $2,000, less deductible, you will get reimbursed for $1,500. It sounds neat, right?

What’s not so neat is that upon renewal, your home insurance premium could get a hike of as much as 20%.  Your higher home insurance premiums will continue for the next few years. After paying higher premiums for 2 years or more, you would have shelled out more than $1,500.  If misfortune strikes and you need to make a bigger claim for damage from a hailstorm, you are going to get another hike in your premiums.

Save Claims for the Big Ones

We are not saying you shouldn’t claim on home insurance. The reason you obtained it in the first place is to reduce your financial burden in cases of damage. However, it is advisable to save a claim for the bigger ones that you really can’t afford.

There is another reason why a home insurance claim could backfire.  Insurance companies are quite good at monitoring insurance history for pricing purposes.  Claims you make on your insurance go on record and raise red flags. They keep records even of home insurance claims they disapproved.  Each time you renew your insurance, your claims history will have a negative impact on your premiums.

How to File a Home Insurance Claim

In the event you need to make a claim on your home insurance policy, the first thing to do is to review your policy.  You will find your policy number and the company’s claim hotline.

You should call the number provided and explain your loss to the representative.  For instance, if there was a burglary in your home, you need to have the police report on hand and provide details.

You will be advised of the next step by your insurer.  If you are claiming a substantial damage, they are most likely going to do an investigation.

Document the Damage

For standard claims for smaller amounts, you must fill-out a required claim form and submit it within a certain period.

You have to provide receipts for lost items you are claiming.  Photographs are also acceptable.  The more documentation you have, the faster the processing of your claim will be.

For larger amounts, the company will conduct an investigation through an insurance adjuster.  A home visit will confirm the damage and the amount needed to repair or replace the damage.

Once the company completes processing your claim, your insurer may organize a third party to conduct the repair work or provide you with a check.

How long do insurers process a home insurance claim?

The time it takes to process a home insurance claim depends on the complexity and severity of your claim and what it would take to correct the damage or loss.  In emergency situations, good insurers will have measures to help you immediately.  For instance, if your home is damaged by fire, your insurance policy could provide you with temporary housing.

If your compensation is delayed or denied and you want to file a complaint, you can contact the Insurance Bureau of Canada.

Most insurance providers will work quickly to settle a claim. If you are unhappy with the service from your insurer, check for a free home insurance quote before renewing home insurance. You certainly deserve the best service and the best price.

Save on Renewal when you Shop Around for Home Insurance

While it is not always wise to file a claim, don’t let fear stop you from claiming when it is really necessary.  After all, the reason you pay for home insurance is to claim when you need to.

When renewal time comes, you can mitigate any effects of home insurance rate hikes by shopping around and comparing insurance quotes.  In this way, you can try to find the best deal.

Fill-out our short online request form to receive your very own home insurance quote from one of our partners (all broker partners and insurers).

This free home insurance quote is no obligation; check it out and save money on your home insurance premiums.