It may seem counter-intuitive, but if your home’s structure is damaged, or you have something you own stolen, it’s not always a good idea to claim for it on home insurance.
Whether it’s tiles blowing off the roof, the drains backing up or losing a phone, the natural feeling is that you’ve paid your premiums for exactly this type of scenario and you should be able to claim on your cover without any consequences. Unfortunately, it’s not always a good idea to follow your heart in such a scenario. In fact, there are a number of factors which should influence your decision as to whether you should approach your home insurer or not.
‘Good’ customer becomes ‘bad’ customer
Making a claim could end up with your ‘good’ customer status being viewed very differently by insurers, and they could use the claim against you in future, pushing up your cover costs for a number of years. Essentially, by causing the least ‘trouble’ possible, you create a virtuous circle whereby each year you don’t claim (up to a maximum number of years) your risk is seen to reduce and the discount you can receive in return increases.
Ultimately, to decide whether to make a claim or not you need do the maths and understand how insurance companies operate in relation to the impact making claims has on your risk profile, and therefore how your premiums are worked out. Here are some of the key factors you need to bear in mind:
- Your risk profile – When calculating your premiums, insurers calculate your ‘risk’ to them. This involves looking at such things as where you live, type and size of property you’re insuring and the value of your possessions. However, they also look at your previous claims history and, to an insurer, nothing suggests a ‘lower risk’ customer more than one with zero claims.
- Premiums hiked for years to come – Any claim you make won’t just count against you in the year following your claim. At renewal time after making a claim you’ll generally find insurers will put up your premiums. But don’t expect your premiums to then fall substantially again over the next few years; claiming will continue to affect how much you pay for a good amount of time to come.
- How long do insurers hold claiming against you? – Most insurers will look at your claims history over a 6 year period, holding it against you if you’ve made just about any claim during this time (whether the claim is large or small, the effect can be the same). However, you’ll find some insurers look back over shorter periods, with some looking back only 3 years.
- No claims discount ruined – Of course, you should shop around to compare quotes at renewal time, and while you may find a cheaper deal for the same level of cover, you won’t be offered any extra discount which you probably would have if you hadn’t made any claims.
- Number of claims, not value – As touched on above, it’s the number of claims, not the value of claim that counts. If, for example, your home insurance costs you £300 per year, and you approach insurers at renewal time having made two claims during the previous cover period, it could push up your cover costs by as much as £60 per year. If you’d only made one claim, it wouldn’t be as much.
- Think about your excess – Home insurance policies have a compulsory excess, which is the first part of a claim you have to pay before the insurer will cover the rest. If you’re making a claim for a £200 smartphone which you’ve had stolen, but the compulsory excess on your policy is £150, then the insurer will only cover £50 of the claim. And the effect on your premiums over the coming years could be far more than the £50 you receive.
- Voluntary excess – One way to lower the cost of your premiums, which many people opt to do, is to choose a higher level of excess. A higher excess means your less of a ‘risk’ to an insurer and your premiums will be lower than for those opting for a lower level of excess. However, this also means that even larger claims of, say, £500 or more, might not be worth claiming for because of the impact it can have on your ‘risk’ profile.
We carefully select the insurers on our panel for their cover levels, price and claims service; to make sure you get the best possible quality for less. What you see is what you get – no hidden excesses or excessive fees. To speak to one of our experts, call 0203 014 9300 or email email@example.com