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Should You File a Homeowners Insurance Claim? Thumbnail

Should You File a Homeowners Insurance Claim?

Financial Planning

When your home is damaged, one of the first decisions you face is whether to file an insurance claim or pay for the repairs out of pocket. While homeowners’ insurance is an essential safeguard against major financial loss, not every repair warrants a claim.

The decision often comes down to several factors: the size of the loss, your deductible, your recent claims history, and the potential effect a claim could have on your future insurance premiums. Taking a few minutes to evaluate these factors can help you make a more informed financial decision for your home, budget, and long-term coverage costs.1

A Claim May Cost More Than You Think

Filing a homeowners insurance claim doesn't always end with receiving a check. In some cases, it may also result in higher insurance premiums. One study found that filing a homeowners insurance claim increases premiums by an average of 9% nationwide, although the actual impact varies by insurer, location, and the type of claim. ²

While some insurance carriers offer claim forgiveness programs, it is still critical to weigh the immediate payout against the cumulative cost of higher premiums over the next three to five years.

When Paying Out of Pocket May Make Sense

There may be situations where absorbing repair costs yourself is the wiser financial strategy:

  • The damage is relatively minor. After accounting for your deductible, a claim of only $1,000 to $2,000 may provide limited financial benefit while still affecting future premiums.
  • The loss may not be covered. Before filing, review your policy or speak with your insurance professional. Even a denied claim may become part of your claim’s history.
  • You have filed a claim in recent years. Insurance companies track claims history, and multiple claims within a short period may influence future premiums or even affect your ability to obtain coverage.

One important exception involves liability. If someone is injured on your property, notifying your insurer promptly is generally advisable, even if the financial impact initially appears small, especially if there's any possibility of legal action.

Understanding Your Deductible

Your deductible is the out-of-pocket amount you must pay before insurance coverage begins. Because you bear this upfront cost, it serves as the baseline for evaluating whether a claim is worthwhile.

Selecting the right deductible is a balance between today’s premium costs and tomorrow’s potential out-of-pocket expenses:

In general, choosing a higher deductible lowers your insurance premium, while a lower deductible increases it. The best choice depends on your emergency savings, monthly budget, and comfort level with assuming more financial responsibility after a covered loss.

For example, would saving $165 per year on premiums justify increasing your deductible from $500 to $1,000? ³ For some homeowners, the answer is yes. For others, the added financial risk may outweigh the annual savings.

Keep in mind that premium savings vary by policy type, the value of your home, where you live, 

The Bottom Line

Homeowners insurance is designed to protect you from catastrophic financial setbacks not routine maintenance or minor repairs. Before submitting a claim:

  • Calculate your actual net benefit after subtracting your deductible.
  • Consider the potential multi-year cost of increased premiums.
  • Review your recent claims history.

A conversation with your insurance professional can help you evaluate the numbers and determine whether filing a claim or paying for the repairs yourself is the better long-term financial decision.

Making thoughtful insurance decisions is one more way to protect your overall financial plan and preserve your long-term financial security. 

 

Disclaimers & Disclosures

¹ InsuranceQuotes.com. Average rate increases vary depending on state regulations, claim type, and insurer policies.

² Illustrative example only. Actual rate adjustments depend on individual policy structures, geographic location, and home valuation.

This material is provided for educational and informational purposes only and does not constitute financial, legal, or insurance advice. Policy guarantees are subject to the financial strength and claims-paying ability of the issuing insurer.