Landlords: Should You File a Claim?

While occasional property damage is an unavoidable reality of being a landlord, it’s important to carefully consider when you should file an insurance claim.

Claims––especially multiple claims––will often make your rates increase when your policy comes up for renewal. As a policy holder, you have a right to file a claim when you incur damage to your property. However, weighing the benefit of compensation against future rate increases or surcharges is financially prudent. When your policy comes up for renewal, your carrier may even drop your coverage because of current or past claims. And in turn, it may be difficult to find replacement coverage.

Insurance carriers keep a running list of all claims filed in two massive databases, A-Plus and CLUE, and the information is kept for 10 years. But when considering a policy for renewal, carriers generally examine 5-7 years of past claims, with a small handful reviewing back 3 years. But, unfortunately, the time frame for which carriers examine claims has been increasing over the past few years.

Although the rules are not steadfast, two claims in five years will generally increase your rates, and three or more claims in five years may make it difficult to find coverage.

Also consider how much compensation you’ll receive if you file a claim, weighed against your deductible. Although a small claim in and of itself may not affect your future pricing or coverage eligibility, if you file another small claim in a short time period, it could raise your rates substantially. In the long run, you may end up paying more in rate increases than you received in claim compensation.

You may also want to ask your agent about the possibility of a higher deductible to lower your overall rates, which makes sense if you aren’t regularly filing claims and meeting that deductible each time.

Think of filing claims as pulling an ace out of your sleeve—only use them when you really need them.

Not only the number of claims you file, but the type, is relevant. Weather-related claims, especially large-scale events like hurricanes, or those considered “acts of God,” will usually have minimal impact on your renewal rates. Inversely, fire, water damage, and theft claims will almost always have a negative impact on your rates. Liability claims can also increase rates substantially. These types of claims derive from an injury occurring on your property or when you damage another person’s property. The most common examples result from slip and fall incidents and dog bites.

If you incur property damage and are unsure if you should file a claim, don’t hesitate to contact your agency. You’ll be advised on each situation’s risk versus its benefit.

If your rates are currently high due to past claims, agencies may also be able to secure lower rates with another carrier that may not examine claims for as long of a time period.