4 Questions to Consider Before Filing A Homeowners Insurance Claim

by Jason Cass

One of the top questions friends or members of the community ask me (since they know I’m an insurance professional) is whether or not they should file a claim on their homeowners insurance.

Here are some that come to mind:

Is it worth getting a travel insurance policy on my $5,000 camera equipment when I have homeowner’s insurance to cover it? [The end question is, is it worth it to file a claim if something happens to the camera equipment?]
I just filed a claim on some roof damage last year and I now have to deal with some mold in the ceiling. Should I file a claim again this year?
Should I file a claim to upgrade the rotting window and door panes on the first floor?
I’ve had flooding damage from a pipe burst on my second floor. With my low deductible it seems worth it to file a claim, but the repair is not over $5,000. Should I file a claim?

When filing a claim, or filing a claim too many times in a period, one of the two can happen:

Your insurance company can refuse to renew your policy–or cancel it
Your insurance company increases your premium

Even though all your issues may be legitimate, it’s not always the best choice to file a claim. As a rule of thumb, insurance is there to protect you for significant damage. It’s hard to quantify what “significant’ means, but we’re talking about tens of thousands of dollars in replacement costs, and not necessarily the $5,000 camera equipment that got stolen at the metro station overseas. But it’s all relative and you need to consider some questions before filing a claim.

Before you file a claim, consider the following:

How many times have you filed a claim on your home, and how many claims have you individually filed as a homeowner? Keep in mind that all claims are reported and used by insurance companies to determine your premium. Statistics show that homeowners who file a claim once are more than likely to file a claim a second and third time. So one thing insurance companies do is adjust the premium to make up for future risk. Not only that, but if you have a history of filing claims, there can be a point where you can no longer be insurable. There will still be ways to insure you, but it’s a bigger hassle to go over.
What is your deductible? Are your repairs or losses less that your deductible? You have to be willing to see the math over time, not just during the time of loss. When you file a claim, it goes on record, even if your claim is denied. In the case where your repair or loss is lower than your deductible, you won’t receive any payouts, and it’s more logical to take a loss.
How big is your damage? If it’s relatively minor consider eating the cost to fix it, especially if your payout is just slightly above your deductible. The increase of premium won’t be worth the cost over time. Most insurance experts suggest that anything under $5,000 is not worth the claim.
Is the damage or loss due to poor maintenance on our part? The best way to avoid filing a claim is to prevent potential damage or loss. Do whatever it takes to maintain your home. If you file a claim and insurance deems negligence on your part, they could very well deny your claim.

We know your situation may not be as straight forward. There are a lot more to consider, especially as it relates to your finances and what you can do and afford at the moment. Don’t hesitate to go to the trenches with a trusted independent insurance adviser. We’re here to help.