Have you ever considered making a claim on your home insurance policy, but decided against it because you knew it would make your rates go up?
Have you ever made a claim on your home insurance policy, and then watched your premium skyrocket the next year?
Did you think: This is ridiculous; what is the point of insurance if you can’t make a claim! Why am I being punished for this?!
Well, you are certainly not the only one.
I suspect most people would agree that drivers who get into accidents should pay more for insurance than those who don’t get into accidents. The same principle applies to home insurance – those who make claims pay more than those who don’t. The difference is that, unlike with car accidents where someone is at-fault, so often damage to homes is unavoidable, and not a direct result of the homeowner’s actions (or inaction). And still the premiums rise.
The frustration is understandable, but there is a way to mitigate it…
Following a claim, insurance companies take action. Sometimes your premium goes up. Sometimes your deductibles are increased. Sometimes coverages are restricted. All of this to discourage claims, because the more claims an insurance company pays, the more premium it has to charge all of its clients (even the ones who have never made any claims!).
And while you can’t stop insurance companies from much, you can stop them from removing your claims-free discount following a claim, if you have the proper coverage.
Over the past few years, most insurers have introduced some sort of Claims Protection coverage that can be added to home, condo, and tenant insurance policies, for a relatively small fee each year. Some people consider this “insurance for your insurance” – you pay a fee to protect your premiums, just like you pay a fee to protect your home.
The odd company has claims-free discount protection “built-in” to their home insurance policies, to protect their clients’ discounts following their first claim, without having to charge for it. However, most companies require the coverage to be purchased, usually for a fee of $25-$50 per year.
Like pretty much everything else, the way this coverage works varies by company:
- It may be one “free” claim every 3 or 5 years
- It may protect your claims-free discount AND waive your deductible for a claim
- It may be packaged with other enhancement features, such as the option to take a cash payout instead of rebuilding your house if it’s destroyed
- It may only apply to one location you insure (for instance, if you have a house you live in and a condo you rent out insured on the same policy, it may only apply to the house).
Most insurance companies require you to have gone at least three years without a claim before you can purchase the Claims Free Protection. This means that for anyone who has not had continuous insurance for three or more years, the coverage is not available, nor is it available for these who have made a claim in the past three years. But for those who have been building a claims-free discount for several years, the coverage is usually available, and always recommended.
Despite all this, your premium may still increase following a claim. This could be due to general rate increases, or, depending on the severity of the claim, an added surcharge. The best thing you can do after you make a claim is talk to your insurance broker to find out how your policy will be affected, and what to do moving forward.
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Morgan Thomas, BA (Dtn.)
Team Leader, Personal Insurance Service Associates