Archive for Friday, July 14, 2006

Small insurance claim could turn costly

July 14, 2006

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Q: A pipe inside one of our bathroom walls suddenly broke and caused about $900 in damage to the wall itself and a few tiles on the floor. Should we file a claim with our insurance company, or would it be better just to pay for the repairs ourselves so our annual premiums won't go up?

A: It would probably be best just to pay for the damage out of your own pocket. If you have a typical $500 deductible, the maximum you could hope to get from the insurer would be about $400 - an amount that's not really worth the risk of seeing your annual premiums rise.

More importantly, there's a good chance that filing a claim might well result in the insurer canceling your policy altogether. Many companies are particularly wary of customers who ask for reimbursement for water-related damage: They'll pay for the repairs, but then refuse to renew the policy in order to avoid the chance of getting hit with a costlier mold-related claim down the road.

Nearly one-third of customers who filed more than one or two water-related claims in the past three years have subsequently had their policies arbitrarily canceled and then had to find a new insurer, who charged two or three times more, according to a recent study by California's insurance commissioner. In many cases, homeowners who received a modest $200 or $300 reimbursement soon found that their premiums had jumped by more than $500 or $1,000 a year.

Because it's becoming increasingly unwise to file small claims, many homeowners should consider raising their deductibles in order to trim their annual insurance costs.

Homeowners who have a standard $500 deductible but raise it to $1,000 or $2,500 can easily slash more than 30 percent off their bill, which can save them hundreds of dollars a year while still providing adequate coverage if they later suffer a major loss.

Q: A seller recently advertised that his property includes two acres of "airable" land. What does this term mean? I tried to look it up in the dictionary, but couldn't find it.

A: You couldn't find it in your Webster's because the proper spelling is "arable." An arable parcel is land that can be cultivated for farming.

- David W. Myers is a 20-year veteran of the newspaper and magazine business, having previously covered real estate for the Los Angeles Times and Investor's Business Daily.

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