Insurance claim for $4000 water damage?

Question

Greetings,

Follow up question from previous post. OOS property had a leak. Plumber  (pre-leak) who had replaced washer shutoff didn't replace adjacent pre-existing low quality connector which cracked (source of leak); this low quality connector wasn't his work so I think I'm on my own to deal with the expense.  Post-leak; servpro and plumber will cost about $4000. My deductible is $2000. Have never filed a claim. Is it worth it to file a claim?

Much thanks.

Bill B. · Answer

If you have only one property and never plan to buy another it could be worth making a claim.

Even with only a dozen properties I save several thousand per year for having zero claims in the last 10 years, I save another another few thousand for having deductibles between $2500 and $5,000.

In 23 years, with a dozen properties (276 “property years”) I’ve made two claims. Both were toilet supply lines that broke flooding 2 different properties about 10 years ago. The claims were each around $30,000. Allstate sued the manufacturer once and refunded my deductible, the other time I paid it. I had to eat one clothes washer flood about 4 years when it didn’t turn off while filling for a little unde $5,000.

I figure I save $5-6k per year with high deductibles and by paying that $5,000 loss out of pocket. It has saved me $100k easy and I've only got a dozen properties. For reference these are 2 townhomes (1 in MN 1 in Vegas) and 10 x SFR. The townhomes are worth $300 and $700k and cost $320 and $410 annually to insure). The SFR are worth between $350-$620k and cost $520-$730/annually to insure.

TLDR: Insurance is supposed to be for catastrophic lapse, use it that way. If you have several properties or plan to writhing a few years, pay it yourself, it’s $2k less than the price of many things you may have to pay for intel future. If you only have 1-2 properties and don’t plan to pay more, I MIGHT make a claim, as long as you have time to shop around for a new insurance company fi they jack your rates. Are your personal home and vehicles with them too? That also will need to be reshopped.

Carlos Ptriawan · Answer

Not really bs because they can't reveal that information. If I were you I will just file a claim.

Matt Devincenzo · Answer

For me I wouldn't file...but I also keep a $5K deductible. I plan on covering anything that's less than $10K or double my deductible. If I had an actual claim I can always still make it if I chose to, but I don't have to. I want insurance for a real and somewhat significant loss, not something that I can otherwise cover relatively easily.

Nathan Gesner · Answer

Filing the claim will save you $2,000 but it may also increase your premiums. I would talk to the insurer and try to get a feel for whether this will affect your insurance rates. Even if it does, the increase should be minimal and probably still worth it.

Aaron Porter · Answer

It is really hard to say what affect filing a claim will have.

One of the reasons for this is if we as your licensed insurance agent tell you something and then we are wrong we (your agent or agency) can be held liable for for that wrong information. So in a way we are trying to cover our butts and in another way we only can give general information based off of what we have seen from past claims processes.

Some agents have had very few claims so they don't have a lot of experience to base their response off of.

In my experience a claim that pays out less than $5k has very little if any effect on a homeowners policy. But every case is different, and there is always the chance that your carrier will give you a major increase in annual premium, or a non renewal.  Weirder things have happened in Property/Liability insurance in the last few years.

Nathan Grabau · Answer

I would call your insurance broker and ask them what they think. They should be able to give you perspective on how it will impact you. I am not sure how what type of claim you file will impact your insurance costs in the future, but they should be able to share some perspective on that.

Manco Snead · Answer

@Nathan Gesner  Thanks for the feedback. I asked my insurance agent how filing a claim would affect my rate and she was completely useless, basically saying that nobody knows how my rate would be affected because it is determined by a computerized algorithm. I called BS, but she still didn't give me any useful info.

Bo Bond · Answer

Manco,

To add to Aaron's great response above, the reason your agent responded in this fashion is because they don't actually "underwrite" your account.   In lay terms, the carrier/underwriter is there to apply rates to your account, review loss history, review market conditions, apply debits/credits to your account, and send the agent a quote.  This is "not" what an agent does (in most cases).  If the underwriter isn't willing to specifically answer your question via your agent (which in most cases they won't), then your agent certainly won't provide you with any specific direction either.  However, a tenured agent will give you an idea of what they've seen and experienced over the years with other clients in similar situations.  I believe you've received some of that direction above from other agents and investors.

If you’re more than 2 months out from your policy renewal when a claim takes place, then you're not likely to get much direction from the underwriter when you ask a question like this.  Carriers/underwriters typically don't want to commit to anything specific unless your policy is soon to renew.   Just as we've witnessed in the past year or so, catastrophic storms, market uncertainty, economic issues, inflation, tightening reinsurance markets, etc. can all have a significant impact on a carrier’s rates and how they approach the renewal of "every" policy they write .

I do think you have some good direction above about whether to file a claim or not.  I don’t believe things will go wrong for you either way given this is a pretty small claim in general.

Hope this helps!  Good luck!

Scott E. · Answer

Ouch that's a high deductible. I'd still file the claim. Also make sure to tell your insurance provider about any other damage that was caused as a result of the leak (flooring, baseboard, drywall, paint, etc).

I've only filed 1 claim and it was on a roof, the cost to replace was around $10k. Didn't negatively impact my rates too much, and didn't affect me when I sold the place.

Insurance claim for $4000 water damage?

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