These Are The Worst Home Insurance Claim Mistakes

Because home insurance can be complicated, it's no surprise that filing a claim on your homeowners insurance can be complicated as well—especially if you have extensive damage or a complex claim. However, you can avoid making some of the most common home insurance claim mistakes.

Your chances of filing a claim in 2020 may appear to be higher than ever. The eastern United States is nearing the peak of hurricane season, while the western United States has already begun its annual battle against wildfires and whatever else Mother Nature throws at it.

According to the most recent Insurance Information Institute data, nearly 6% of insured homeowners filed a claim in 2018. Approximately 98 percent of those claims were for property damage (including theft).

If you have suffered a loss and need to file a claim, there are a few things you can do to help the process go as smoothly as possible. Here are a few examples of common home insurance claims to avoid.

Home Insurance Claim Mistake No. 1: Failing to Read Your Policy

You could be excused for failing to read your home insurance policy. After all, insurance policies can be difficult to comprehend. But that doesn't absolve you of responsibility. At the very least, Charlie Wendland, head of claims at Branch, an online insurance startup, recommends that you understand what the coverages in your policy mean.

Some policyholders, for example, believe that "water backup" coverage is the same as flood insurance. It's not.

"Water backup is very specific in that it only covers damage caused by a backup of a sewer drain or a sump pump," he explains. According to Wendland, misunderstanding (or failing to read) your policy can lead to disappointment and almost always results in a poor customer experience during the claims process.

Home Insurance Claim Mistake No. 2: Not Having the Right Coverage

"One of the worst mistakes a homeowner can make happens before a loss," says Gina Clausen Lozer, a partner at Berger Singerman. "It's a lack of appropriate coverage."

You may find yourself in a significant financial hole if you do not have the proper insurance. A thoughtful conversation with an insurance agent can assist you in avoiding these mistakes.

For example, if your policy only provides actual cash value coverage for your possessions and you expect to be reimbursed for replacement cost, you'll be disappointed.

Some homeowners believe that their home insurance policies cover damage from hurricane wind and flood water. However, that assumption could prove to be a costly mistake. Wind damage may be excluded by insurance companies in hurricane-prone areas, and flood damage is generally excluded by a standard home insurance policy. A good hurricane insurance plan may consist of three separate policies to ensure you have adequate coverage.

The bottom line is that policy exclusions can bite you, especially if you live in an area prone to natural disasters.

Home Insurance Claim Mistake No. 3: Not Having a Home Inventory

Another claim blunder that begins long before there is any damage: failing to keep a home inventory. This comprehensive inventory of your belongings is especially important if you have extensive damage. If you have to work from memory, you are more likely to forget some items and leave them out of your claim.

Sure, you'll recall your living room furnishings. But will you remember everything in your kitchen and in your drawers and closets? A home inventory will help you file your claim more quickly and easily.

Home Insurance Claim Mistake No. 4: Failing to Maintain Your Property

Home insurance is intended to cover unexpected damage, not problems that could have been avoided.

Neglecting to maintain your home can result in issues that are not covered by home insurance. Damage caused by a burst water pipe, for example, is covered. However, if you do not repair a roof leak, your claim may be denied because you did not take action to prevent further damage.

"Failure to notice and report a potential claim, such as a slow leak, can result in a claim denial," says Sarah Loy, an agent with American National Insurance in Las Vegas.

Home Insurance Claim Mistake No. 5: Poor Communication

According to Tim Barziza, senior vice president at Chubb, the majority of home insurance claim mistakes are the result of poor communication. "When filing a claim, homeowners are frequently ambiguous in describing the damage to their property," he says.

According to Barziza, poorly communicated claims by the homeowner typically result in delays, which can bog down the entire claims process. When filing a claim, he advises homeowners to be as specific as possible about the damage.

Home Insurance Claim Mistake No. 6: Waiting

Another mistake, according to Tim Felks, Farmers Insurance's head of property claims, is waiting too long to file a claim. "Damage does not improve with time," he says. "Reporting a claim as soon as possible can help get repairs started faster, reducing the amount of time the insured is dealing with the repair process."

You could have up to a year to file a claim (it depends on the state). But, according to Felks, there is no advantage to waiting. Don't wait if your home is damaged by a tornado or burned down by a wildfire.

Home Insurance Claim Mistake No. 7: Trying to Tackle a Big Claim Alone

Large and costly claims can be extremely complicated and take months to resolve. Meanwhile, you may have to deal with multiple insurance adjusters and stacks of paperwork.

If your home has sustained extensive damage, you should consider hiring a public claims adjuster as soon as possible. This is someone who works on your behalf to deal with insurance adjusters, ensure you have the necessary documents, and meet deadlines.

A public insurance adjuster's fee is typically 20% of the insurance settlement. It may be well worth it because they will assist you in obtaining what you are entitled to and reducing your stress.

Home Insurance Claim Mistake No. 8: Not Documenting the Damage

The most common mistake Jason Christiansen sees in claims is a failure to document damage. "It's not taking pictures—documenting the damage as soon as it's discovered," says Christiansen, co-CEO of Young Alfred, a home insurance website.

When it comes to filing a claim, photos are your best friend. You should have "before" and "after" photos of the extent of the damage to your home.

"This can help a lot with the payout," Christiansen says.

Home Insurance Claim Mistake No. 9: Cleaning Up Too Fast

You may be in a hurry to clean up after an accident. However, cleaning up too quickly can be a costly financial mistake.

Homeowners frequently discard items damaged in a fire or flood before the total damage is documented. They also throw away receipts that they need to support a claim. If you're filing a claim for a damaged item, keep it until you have sufficient documentation, such as photos or repair estimates, that it's been damaged.

During the course of a claim, it is critical to maintain a thorough paper trail. Failure to do so could result in a costly home insurance claim.

Home Insurance Claim Mistake No. 10: Filing Too Many Claims

When determining your rates, insurers will look at your claims history. Insurers can search the Comprehensive Loss Underwriting Exchange (CLUE) database for homeowners and auto insurance claims filed in the previous seven years. The more home insurance claims you have in your history, the higher your premiums will most likely be.

This is because insurers associate claims with a higher risk of filing additional claims in the future. Customers who pose a higher risk are charged a higher premium. So, if you have the means, it may be better in the long run to pay for minor repairs yourself rather than file an insurance claim.