A client sent me an email last week stating he has a roof leak in his north Texas home which was probably caused by hail. I outlined what I recommend in such cases; have a local roofing company inspect it for hail damage, and if there is damage from hail to obtain an estimate to repair or replace the roof. I also provided him with his home insurance policy number, the phone number to file a claim, and the amount of his deductible.
He replied to my email wanting to know what the impact will be on his upcoming renewal if he files a home insurance claim. This is an excellent question. It comes up in almost every conversation I have whenever I talk with someone about a potential or actual claim.
The impact a home insurance claim varies widely by state. According to a CNBC article from November of 2013, Texas home owners rank in the lowest 5 states nationally for premium increase based on a single home insurance claim with a 0% rate change. Rounding out the bottom 5 were New York with a 1% increase, then Florida, Vermont, and Massachusetts with a 2% rate increase. The top 5 states were Minnesota and Connecticut with a 21% rate increase followed by Maryland (19%), California (18%), and Oregon (17%).
The wide difference in rate increase from the top 5 to the bottom 5 are due to the difference between state laws regarding the approved amount of rate increase. Insurance rates and practices are regulated at the state level and in Texas, our law states insurance companies are not allowed to increase a homeowner’s insurance rate based on a single claim.
This is good news for Texas homeowners, however, it doesn’t mean the rate won’t increase when the policy renews. Home insurance rates will typically change from year to year based on rate changes by the insurance companies and inflation guard protection which most home policies contain (see http://126.96.36.199/~wiseinsu/will-home-insurance-rate-change-next-year/). The other side of the coin is not so rosy though, home insurance claims impact a homeowner’s ability to move to another company if there is a ridiculous rate increase by their current carrier.
All home insurance companies look at prior home claims when determining whether or not to extend coverage to someone. In addition, prior claims usually impact the rate a new company will offer. Weather related claims such as hail, wind, lightning strike, etc. don’t lead to an individual rate increase at the renewal, but rates may increase for all policy holders in certain zip codes where claims were clustered in the prior year.
Filing a claim is ultimately up to the homeowner. I recommend, as I did with my client, he determine whether the damage is covered (it is), what the extent of the damage is (is he needing only to fix a few loose shingles or does the roof need to be replaced), and how it compares to the policy deductible. If the cost to repair the damage makes it worthwhile to file the claim, then file the claim and be done with it (see http://188.8.131.52/~wiseinsu/home-claims-and-determining-whether-to-file-one/). But, if the cost for repairs only exceeds the deductible by a small amount, then it may make better sense to pay for the repairs without filing a claim.
What do you think? Share your thoughts, suggestions, and experiences with me on our Google + and Facebook pages. I’d love to hear from you!