Client Care Portal 

Understanding Zero-Paid Home Insurance Claims

4 min read

Understanding Zero-Paid Homeowners Insurance Claims

& Their Impact on Insurance Eligibility

 

Insurance is supposed to be a safety net, providing financial protection against significant losses and catastrophes. However, navigating the intricacies of insurance policies can sometimes be confusing, especially when it comes to claim payouts. Here, we’ll explore the complexities surrounding zero-paid home insurance claims and how they can affect your eligibility for coverage. 

 

Don’t File a Home Insurance Claim Before You Know You’re Ready.

Before you decide to file a claim, it’s important to try and evaluate whether the claim: 

  1. Would be covered,
  2. Is financially necessary, and
  3. Is sensible for you.

 

Since filing a claim can impact your insurance record, even if no payout is made, consider:

  • Is this incident covered? Most incidents that occur due to wear and tear are not covered.
  • Is this financial burden too much for me to bear on my own? If so, a claim is probably necessary.
  • Would filing a claim for a damaged $1,100 couch make sense when I have a $1,000 deductible? A $100 savings might not be sensible given the potential negative impacts on your insurance.

 

Clarifying Inquiries About Filing a Claim

If you’re uncertain whether an incident meets the criteria for filing a home insurance claim, make it clear to your Insurance Advisor that you’re only inquiring and not intending to file a claim. Document this communication to avoid any misunderstandings. This step can prevent an inquiry from being mistakenly recorded as a claim, which could affect your insurance history (and future). As you’ll see in the story below, even trivial inquiries can impact your eligibility for future savings. 

 

So What Are Zero-Paid Claims?

A zero-paid claim refers to a claim that is reported to an insurance company, but ultimately no payment is made by the insurer. This can happen for various reasons, such as: 

  • The deductible being higher than the cost of the damage,
  • The damage not being covered under the policy, or
  • The claim being withdrawn by the policyholder.

 

Despite no money being paid out, the incident is still recorded in the policyholder’s claims history, which can affect future insurance eligibility and premiums. Zero-paid claims may seem insignificant to you, but it is a significant factor to many insurers.

 

Why Zero-Paid Claims Seem Risky to Insurers

As explained in this video, for-profit insurance carriers are concerned with whether you (and many other policyholders) will make them money or lose them money; insurers evaluate and manage the risk presented by policyholders. To determine the level of risk they’re taking on, carriers ask questions on insurance applications, including questions about past claims. From an insurance carrier’s perspective, a zero-paid claim still represents a potential risk. It indicates:

  1. That a costly incident occurred
  2. That the policyholder is more familiar with the claims process, which might suggest a higher likelihood of future claims

 

Insurers use claim history to assess risk, and even a claim with no payout can signal increased risk. To manage this risk, they might charge more money for the policy or deny coverage altogether. Therefore, trying to use insurance for insignificant losses is mostly detrimental.

 

Insurance as Financial Protection from Major Issues

Insurance should be viewed as a tool for financial protection against significant losses or catastrophic events. It’s generally not advisable to file claims for minor issues or damages that are close to your deductible. In fact, many people keep high deductibles since higher deductibles generally equal lower premiums and significant losses, for which they would need the insurance, are improbable. Trying to keep your claim history clean can help maintain eligibility for appropriate coverage, better rates and result in significant long-term savings.

 

True Story: A Zero-Paid Claim’s Long-Term Impact

A recent customer’s daughter accidentally broke their TV. With a $5,000 deductible, the cost to replace the TV was much lower, so he never intended to file a claim. Out of curiosity, he called his insurer to ask if the incident was claimable. Despite not intending to file a claim, this inquiry was recorded as such. Years later, while shopping for new insurance, this zero-paid claim made him ineligible for many policies that could have saved him over $1,000 a year. This case highlights how a seemingly trivial inquiry can lead to substantial financial consequences. 

 

Additional Considerations 

 

  • Review Your Deductibles: Ensure your deductibles are set at a level that makes sense for your financial situation. High deductibles can lower your premiums but might not be suitable for everyone. Chat with a Green Brook Onboarding Advisor to discuss particulars. 

 

  • Commit to a Regular Policy Review: Regularly review your policy and claims history with your Insurance Advisor to ensure there are no misunderstandings or errors that could impact your coverage. Green Brook’s clients are offered Annual and Semi-Annual Policy Reviews (APRs).

 

  • Educate Yourself on Policy Terms: Understanding the terms and conditions of your insurance policy can help you make informed decisions about when and how to file a claim. 

 

By following these guidelines, you can better manage your insurance coverage and avoid the pitfalls associated with zero-paid home insurance claims. Always remember that insurance is there to protect you from significant financial losses, and thoughtful management of your policy can help you maintain the best possible coverage and rates. Would you like to discuss a claim situation or have another question? Email us at ContactUs@GreenBrookIG.com.