Will my homeowners insurance pay for lost luggage?
Many policies cover lost luggage and other small losses, but you may not want to submit a claim even if you qualify for a payout.
Homeowners insurance companies have been struggling financially over the past few years, so they've been trying to get back on track by boosting premiums and dropping customers that cost them a lot of money. As a result, many homeowners insurance companies won't renew your coverage if you submit just two small claims within a few years.
If your company drops you, you may have a tough time finding insurance anywhere. Insurers share claims information through a database called CLUE (Comprehensive Loss Underwriting Exchange), and many won't want to touch someone with a reputation for filing several claims -- especially if any of the claims were for water damage. If you finally do find a new company to insure you, don't be surprised if it charges you double (or more) what you'd been paying in the past.
Because of this situation, it's best to avoid filing a claim worth about $1,000 or less. This may seem crazy since you buy homeowners to pay out if you have a loss. But if you end up getting dropped, the extra charge for your new policy could end up costing you much more than the payout you received from the claim.
To get some benefit from taking on so much of the risk yourself, raise your deductible to at least $1,000. Some folks with decent emergency funds are even increasing their deductibles to $2,500. Raising your deductible from $250 to $2,500 could cut your premium by up to 30% -- and eliminate the temptation to submit a small claim that could get you dropped. Also drop add-on coverage that encourages you to make small claims, such as riders for jewelry worth $1,000 or less.
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