After a weekend of storms in our area, fallen trees are a common site. The cleanup of these trees are also covered under most homeowners policies. But should you turn that claim in??
Over the past few years I have seen most Insurance Companies (in Michigan) institute a “Paid Loss Surcharge” for multiple claims on a Homeowners Policy. The amount of the surcharge varies by company but usually will kick in after two paid claims in a three year period (DISCLAIMER – every company has different guidelines, is it weather related, was it a catastrophic storm, could the loss have been avoided etc, etc)
When I receive a call from an insured regarding a loss that is covered on their homeowners policy, I absolutely HATE to recommend that they do not turn the claim in. I hate it because when I sold them the policy it was a promise for the policy to respond when they have a covered loss.
Unfortunately over the past year or so I find myself more and more recommending that they pay the small losses themselves. Let me give you a real world example of how the claims surcharge works and why it may be beneficial to take care of some smaller losses yourself.
2008 -2009 Homeowners Premium : $881
- 2008 Toilet Leak ~ Paid $400
- 2009 Diamond fell out of ring ~ Paid $84
2009-2010 Homeowners Premium: $920
- 2010 Power Surge ~ Paid $6662.57
2010 – 2011 Homeowners Premium: $3,821 (paid loss surcharge applies)
Due to having three claims within 3 years this insureds premium increased over 400%. Being an Independent Agent we were able to look around for other options and the insured checked with other carriers as well. We were able to get his premium down to around $2,500 by raising his deductibles.
Back in 2008 or even early 2009 claims surcharges were not on our mind. If we were able to see in a crystal ball we would have advised the insured to take care of the toilet leak or the missing diamond himself. Had he done that he would have avoided the giant increase that came in 2010.
I am not a fan of the claims surcharge but it looks like it is here to stay.