Insurance is a critical component of property management, offering financial protection against a range of unpredictable events. Many home and business owners express concerns about filing even a single insurance claim. The most common concerns property owners have when filing insurance claims for wind damage to their roof or hail damage to their homes are that their rates will soar or worse – they will be dropped from (lose) their insurance coverage altogether.
However, not all insurance claims are viewed equally by insurers. Understanding the differences between claims resulting from natural catastrophes, negligence, and accidents can help homeowners and property owners effectively manage their policies and anticipate the potential impacts on their insurance rates and coverage.
Natural Catastrophes: Acts of God
Natural catastrophes, or “Acts of God,” include events such as hurricanes, tornadoes, earthquakes, and other major natural disasters. These events are inherently unpredictable and completely out of a property owner’s control. Insurance policies typically cover such incidents under standard homeowners or property insurance, but the aftermath of filing a claim for an Act of God can be multifaceted. While coverage may vary from one policy to the next (see more about the different types of policies here https://americancommercialroof.com/does-insurance-always-cover-a-full-roof-replacement/, the primary focus of most homeowners is whether or not they will be singularly impacted in any negative way. The short answer is no. While a property owner may lose some promotional discount for having never filed a claim, these are generally marginal savings that pale in comparison to the costs associated with a storm damage restoration project.
Regulatory Protections: In most jurisdictions, regulations protect homeowners from rate increases or policy cancellations solely based on an Act of God claim. For example, after Hurricane Katrina in 2005, regulatory bodies scrutinized insurance companies that attempted to unilaterally raise rates or cancel policies. These protections are crucial for homeowners in disaster-prone areas, ensuring that natural events do not lead to financial ruin due to lost coverage or unaffordable premiums.
Negligence: Human Error and Property Maintenance
Negligence refers to damage that occurs as a result of a homeowner’s actions or inactions that were within their control, such as failing to repair a leaky roof or ignoring necessary electrical upgrades. Claims filed under circumstances of negligence can lead to increased premiums or even policy cancellation because they indicate a higher risk associated with insuring the property.
Real-World Impact: Consider a homeowner who neglects to clean their gutters, leading to water damage and mold inside the walls. The insurance claim filed could result in higher future premiums because the damage could have been prevented with proper maintenance, thus reflecting a higher risk to the insurer. The purpose of insurance is to protect homeowners from costly repairs they could not prepare for, not be a home maintenance plan for negligent homeowners.
Accidental Incidents: The Unforeseen and Immediate
Accidents, such as unintentionally flooding a bathroom or leaving a cooking pan unattended on the stove, represent another category of insurance claims. These incidents are generally seen as unforeseen but avoidable, and while they do not typically carry the same level of risk increase as negligence, they can still affect insurance premiums and terms.
Examples of Accidental Claims:
- Kitchen Fires: Leaving a pan on the stove can lead to a significant fire. If an insurance claim is filed for this damage, the insurer may view it as a one-time accident but might still adjust premiums to reflect the potential for future risks.
- Water Damage: Accidentally leaving a faucet on leading to an overflowed sink and substantial water damage is another common claim. Depending on the extent of the damage and the history of claims made by the homeowner, insurers may adjust policy terms.
Impact on Insurance Rates and Risk Assessment
Insurance companies assess risk based on the likelihood of an event occurring and the potential cost of a claim. Acts of God are treated differently as they are uncontrollable and unpredictable. However, negligence and accidents can lead to a reevaluation of a property or homeowner’s risk profile, potentially increasing rates or leading to non-renewal of policies if such events occur frequently.
Risk Factors:
- Frequency of Claims: Homeowners who frequently file claims, regardless of the type, may be seen as higher risk.
- Severity of Damage: More severe damage often leads to higher claims, which can increase perceived risk and thus impact premiums or policy renewal.
- Zip Code: If you live in high risk areas such as the Florida coast or “Tornado Alley” in Middle America, your insurance premiums will likely reflect the higher risk of storm damages associated with the frequent storms.
Mitigating Increased Rates and Managing Risk
Homeowners and property managers can take several steps to manage their risk and potentially mitigate increases in insurance rates:
- Regular Maintenance: Keeping up with property maintenance and addressing minor issues before they become major can help avoid negligence claims.
- Safety Measures: Installing safety devices such as smoke detectors, carbon monoxide detectors, and leak detection systems can reduce the likelihood of accidental claims.
- Review Coverage Regularly: Regularly reviewing insurance policies and discussing coverage with insurance agents can ensure that homeowners are adequately covered but not overpaying for unnecessary coverage.
- Preventative Measures: Taking steps to prevent accidents or mitigate damage (like installing smoke detectors or water sensors) can positively influence an insurer’s risk assessment.
- Impact Resistant Materials: Proactively maintaining your home’s exterior and using impact resistant products such as Class 4 shingles (Learn more here) can also help lower your risk factors and lock in significant premium savings.
Conclusion
Understanding the differences between various types of insurance claims and their impacts on rates and coverage is essential for any property owner. By recognizing the nuances of Acts of God, negligence, and accidents, homeowners can better navigate their insurance needs and take proactive steps to manage risks. If you have further questions about any potential storm damages to your property, call us at (800) 674-9535 to see if a property assessment with one of our trained professionals is right for you. Always remember to confirm coverages with your carrier prior to meeting an insurance adjuster on site. Here are 6 Great Questions To Ask Your Public Adjuster: to gain clarity before committing to your next claims process.