It’s pretty obvious when an auto insurance claim needs to be filed, for example, if you are in a major accident or your vehicle is stolen.
But filing a home insurance claim can be a little different. Over our years as an insurance brokerage, we have noticed that sometimes homeowners make claims that end up harming their overall insurance rating without them realizing.
Home insurance is there to help you recover from unexpected damage or loss, but submitting multiple small claims over time can actually end up costing you more in the long run. While it might seem logical to use your coverage for every incident, such as a broken window, minor water leak, or stolen bike, insurance companies view frequent claims as a sign of higher risk. This perception can lead to premium increases, changes in your policy terms, or even non-renewal of your coverage.
It’s important to understand how smaller claims affect your insurance record, key to protecting both your home and your long-term insurability.
How insurers assess risk
Home insurance is built on risk assessment. When you apply for or renew your policy, insurers evaluate the likelihood that you’ll file a claim based on your claims history, the property itself, and common regional occurrences such as hail, flooding, or theft.
Even the smallest single can be noted in your file, but multiple small claims in a short period are a red flag to your insurer. This says to them that there will likely be more claims in your future — and theirs. That higher perceived risk could be addressed through raised premiums.
Insurers tend to look at claims over a rolling three- to five-year period. If you have filed two or more claims during that time, even if they’re minor, your record could be categorized as “high frequency.” When renewal time rolls around, you are likely to see a rate increase and even a limit on your eligibility for discounts such as a claims-free or loyalty discount.
The impact on premiums and policy terms
Each time a claim is submitted, your insurer must not only pay out the cost of the loss but there are also administrative expenses due to the time taken for the investigation, the adjustment, and the ultimate payment. For small claims, those processing costs can actually end up to be more than the actual payout, which makes these claims disproportionately expensive for insurers. As a result, those who make frequent small claims often see rate hikes that reflect this added burden.
In some cases, insurers may also see fit to raise your deductible to reduce the chance of future small claims. For example, if you frequently claim for small water damage incidents, your insurer might increase your deductible from $1,000 to $2,500. This means you will pay more out of pocket for any future repairs before insurance kicks in.
If claims continue to occur, you could even face non-renewal of your policy. This can make it difficult and more expensive to find coverage with another insurer, as your claims history follows you through the national insurance database. In Canada, this is typically the Home Insurance Tracking System managed through CGI’s HITS database.
Examples of when to think again
Let’s say your basement experiences $1,200 in minor water damage, and your deductible is $1,000. While you could claim that $200 difference, doing so is not worth it if it results in a premium increase of several hundred dollars per year for the next few years. Similarly, if your home experiences multiple incidents, like wind damage to your roof one year and vandalism to your garage door the next, your insurer may classify your property as higher risk, even if each individual claim was small.
The long-term advantage of a claims-free record
Maintaining a claims-free record is one of the best ways to keep your insurance affordable. Many insurers offer substantial discounts, sometimes up to 20%, for policyholders who go several years without filing a claim. This can lead to significant savings over time, easily outweighing the short-term benefit of a small payout.
Instead of filing smaller claims, consider covering minor repairs out of pocket when you can. For instance, repairing a fence after a storm or replacing a few shingles may be less costly in the long term than triggering a claim and losing your claims-free discount.
More common home insurance misunderstandings
Many people assume that their home insurance fully covers everything under their roof, however standard policies place special limits, often rather low, on fine art, jewelry and other high-cost items.
To fully protect your engagement ring and artwork, you more than likely need an add-on or endorsement that lists them individually and increases your coverage limit.
Second, many assume water damage coverage is broad and included in a standard home insurance policy, without realizing that coverage for overland water, long-term leaks, and sewer backup requires additional endorsements that must be added and paid for separately.
Many people also assume mould is covered, even though it’s often excluded.
Finally, policyholders may think that roof replacements due to deterioration are covered, however they are often now as the damage is deemed to be preventable with regular repairs.
Trust Lane’s Insurance for all your coverage needs
We are a leading Alberta-based insurance brokerage and are proud to partner with progressive providers to ensure our clients have access to the most complete and up-to-date insurance products available anywhere in the province.
As a brokerage, we work for you, not the insurance companies. When you choose us at Lane’s, you’re opting for a proven company with an excellent track record for customer satisfaction. We also offer outstanding claims support and expert advice that ensures all your insurance needs are met. Get started by contacting us at our Calgary, Edmonton, Banff, and greater Alberta offices today for a fast, free, no-obligation quote for home insurance.
