Homeowners Insurance Considerations

Heavy snowfall and below-freezing temperatures have presented myriad challenges for homeowners this winter. The common task of clearing driveways and walkways has been no small burden, and the low temperatures and accumulated snow on roofs and around dwellings can cause significant damage from ice dams, blocked vents, or frozen pipes. In the event of significant leakage from ice dams, or flooding from a burst pipe, it is understandable that many homeowners would consider submitting an insurance claim for damages.

Homeowners should assess other risks prior to submitting a claim to their insurance company— including the risks of having their coverage cancelled and compromising their future insurability. Insurance companies are wary of consumers that submit too many claims and may choose not to renew a policy if they view a homeowner as filing claims too frequently. From an insurance company’s perspective, insurance is in place to protect against significant and costly damage, not necessarily those incidents where the damage is only slightly higher than the deductible or could be viewed as maintenance costs on a home.While homeowners may reasonably perceive that any claim with damage over the amount of the deductible is worthy of submission, insurers prefer customers who file the fewest claims. Insurance companies have a legal obligation to send notice that they are cancelling a policy, but they are otherwise free to drop “frequent
filers” for general business and profitability reasons. Homeowners should always carefully consider whether to file a claim, so that they avoid the transaction costs and possible increase in premiums in the event they are dropped by their insurance carrier.

This winter, however, there is a wildcard that comes into play. Insurance companies have a separate set of rules for catastrophe-based claims— claims that result from one event in a certain geographic area, such as a hurricane. In general, claims for catastrophic events are not held against the insurered, so homeowners may have more leeway to file claims that result from a catastrophe. Some insurance companies in New England, but not all, are treating the recent winter weather as a catastrophe. Whether the snow constitutes a catastrophe is defined on an insurer-by-insurer basis, and, as a result, homeowners should talk to their insurance agents. Here is some advice to homeowners: First, and most importantly, if homeowners have damage as a result
of the recent harsh winter conditions, they should ask their agent whether their specific insurance company is treating the snowfall as
a catastrophe. If so, homeowners should consider filing a claim for damages exceeding their deductible, as the catastrophic classification mitigates future insurability concerns. Second, if the damage is not considered due to catastrophe, submitting claims for smaller amounts may not be worth the risk of losing future insurability. Homeowners are advised to pay for smaller damages that are more akin to ongoing maintenance and save insurance for the truly significant events. Lastly, if homeowners find that damage is consistently higher than their deductible, those homeowners should consider changing their policy to increase the deductible. This will likely lower the monthly premium payments and raise the bar for any potential claims going forward. Homeowners should take note that, while this article pertains to snow and winter conditions, the principles discussed here may apply to other circumstances that cause damage to homes, such as hurricanes or tropical storms. With homeowners having enough worries from the snow, they should feel secure in their insurance coverage. If you have any
questions about your homeowner’s insurance, please feel free to reach out to your financial counselor for assistance.