When people buy home insurance, it’s natural to think that they have bought rights to protection, one which they can rely upon when something goes wrong. After all, that’s what seems to be contracted for when one buys insurance coverage in the first place. However, home insurance needs to be viewed as catastrophic protection versus an everyday problem remedy. A lot of this perspective is due to how home insurance is sold in the first place.
Policies for a neighborhood and region are sold by an insurance provider because the company feels it has enough policies in its pool of customers to offset occasional payout risk. As long as the majority don’t file a claim, the concept works. However, when the number of claims starts to rise, the profit margin starts to disappear. Either those filing the claims now have to pay more for continued protection, or they need to be removed from the pool so that the rest are not impacted adversely. Alternatively, a company could raise rates on everyone, but that will likely drive customers away en masse to the competition, so most insurers don’t choose this path.
As a result, while a homeowner could file a claim for a small damage issue like a broken window or a drywall damage, it’s not a good idea. Each claim tags that homeowner as a rising risk for a coverage provider. Not only will the homeowner’s premium rise as a result come renewal, but the homeowner contracts gets flagged as a potential issue for the pool. On the other hand, a customer who uses the policy only for catastrophic events has a far better response because ultimately that’s what the policy was intended for. Full coverage is honored, and the homeowner has protection when needed.
To better understand how claims work, those in the Brandon, FL region can connect with Runnels Insurance for expert advice and guidance. Their agents understand the claim process in detail and how home insurance can be expected to work.
