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When Should We Skip The Insurance And Pay Out-of-Pocket?
Friday Apr 25, 2011
Abby Anders

Anyone who pays homeowner's insurance knows it's a juggling act to determine when to put in a claim and when to just suck it up and pay out-of-pocket.  Put in a claim, and you might see it reflected in higher premiums down the road. 

It's a legal scam, of course -- the insurers promise to make you "whole" again in the event of an accident, but it feels like a game of "gotcha" once you put in a claim.

Filing a single claim for homeowners insurance generally will not result in higher rates (though they could decide to simply drop you, which is even worse), though putting in more than one claim in a particular period could raise your rates. Although every company is different, filing two claims in a three-year period is likely to trigger an increase, though they will depend on the nature of the claims, notes the Insurance Information Institute.

Dog Bites

The largest single cause of home-policy claims is dog bites.

There are about five millions dog-bite victims annually, according to the Centers for Disease Control and Prevention in Atlanta -- and insurers pay out about $300 million in claims every year.  While there are no stats directly related to dog bites within the gay community, we do have a higher percentage of pet ownership than the population at large, so this is information worth knowing.

According to a survey taken last year, about 71 percent of gay adults say they own pets. Compare this number with 63 percent of heterosexual adults, reports Harris Interactive's survey of nearly 2,500 people nationwide.

Many insurance companies keep a list of dog breeds most likely to attack, based on CDC statistics. If a homeowner owns one of those breeds, it may be difficult to obtain insurance. No surprise, really, pit bull-type dogs account for a third of bites; Rottweilers were responsible for about half of human bites. Smaller dogs, popular in urban areas, aren't known to maul, but they can inflict bites that require medical attention.

But if you own one of the breeds on the "attack" list, it may be difficult to obtain insurance -- and that might rightly inform your choice of dog, if you're looking to expand your family. A single attack, though, is likely to result in higher premiums.

Water Damage

Water damage is a classic red flag for insurers, because of the costs of eliminating mold.  This is why mold is often excluded from coverage in home owner's insurance policies.

If there's a history of mold, which often stems from water damage, a new home buyer may have problems obtaining home insurance. How do insurers find out about this history?  Insurers look at reports from an organization known as CLUE, the Claim Loss Underwriting Exchange. CLUE reports include policy information such as name, address and policy number, and claim information such as date of loss, type of loss and amounts paid. 

In other words, insurance claims leave a paper trail, and CLUE assiduously tracks that paper trail.

Unfortunately, home buyers can't obtain this industry-only type of report, but a home buyer can make the purchase contingent upon the seller providing a copy of the CLUE report.

If the water damage is minor -- like broken pipes, leaks -- you would likely be best off taking care of the problem yourself, rather than filing a claim.

Slip 'N Fall

According to the National Safety Council, slip-and-falls are the largest cause of emergency-room visits. Insurers know this, so if someone hurts himself on your property and files a claim, your rates may rise.  But it also means you can't afford to be without it.