Should You File a Homeowners Insurance Claim?

Homeowners insurance is there to protect you when something goes wrong, but that doesn’t necessarily mean you should file a claim every time you have damage.

Sometimes the decision is obvious. If you have a major fire, significant water damage, or a large storm loss, that is exactly what insurance is for. But what if the damage is only a little more than your deductible? That is where the decision gets more complicated.

Insurance companies can look at your claims history when setting premiums, renewing your policy, or deciding whether they want to continue insuring a property. Because of that, filing a smaller claim may not always be in your best interest.

Start With the Numbers

Before filing anything, get an idea of what the repair is likely to cost.

For example, if your homeowners insurance deductible is $2,500 and the damage is estimated at $3,200, the insurance company may only be paying about $700. Is that $700 worth putting a claim on your insurance history?

Maybe. Maybe not.

The answer can depend on your claims history, your insurance company, the type of loss, and your overall situation.

That is why I think one of the most important things you can have is a good relationship with your insurance agent.

Why Having an Insurance Agent You Can Call Matters

I recently had a minor incident myself — although mine involved auto insurance rather than homeowners insurance.

I accidentally backed into someone else's parked car. Fortunately, nobody was hurt and the damage was relatively minor, a little over $3,000. After exchanging my information with the other car owner, I told him I would like the option of paying for the repair to his car myself.

My first thought was: Should I just pay for this myself or turn it into insurance?

Instead of guessing, I called my insurance agent.

He looked at my history and saw that my last claim had been about 12 years earlier. Based on my record and the amount involved, his advice was essentially, “This is a no-brainer. Put in the claim.” He did not expect that particular claim to cause my rates to increase.

That conversation was valuable because he knew my history and could help me weigh the decision before I did anything.

The same idea applies to homeowners insurance. A good agent can help you understand your policy, your deductible, and your claims history so you can make a more informed decision rather than automatically filing every time something happens.

Of course, every situation and insurance company is different, so what made sense in my case may not make sense in yours.

Be Careful When You're Just Asking a Question

This is another important point that many homeowners may not realize.

If you are calling your insurance company because you simply want to know whether something might be covered, make that clear before giving all the details.

You might say:

“I'm only asking a coverage question right now. I don't want to open or file a claim. Will this conversation be recorded as a claim or reported loss?”

Why does that matter?

There have been situations where homeowners believed they were simply making an inquiry, only to later learn that the incident had been documented as a loss or occurrence. If another claim happens a few years later, an insurer could potentially see more than one incident associated with the property or policy.

That doesn't mean you shouldn't call your agent. Quite the opposite. It means it is helpful to have an agent you trust and to make sure everyone understands that you are asking for advice before actually opening a claim.

Don't Forget Your Claims History

Insurance companies can look at previous claims when underwriting a policy.

That becomes particularly important if you have had several losses in a relatively short period of time. One isolated claim after many claim-free years may be viewed very differently than several claims over a few years.

This is another reason I wouldn't use a simple rule like, “Never file a small claim.”

Your own history matters.

When Insurance Really Makes Sense

Personally, I think of insurance primarily as protection against losses that would be difficult or painful to absorb yourself.

That might include:

• A major plumbing leak

• Significant storm or tree damage

• A house fire

• Major theft

• Extensive water damage

• A serious liability claim

Those are the types of events where having good insurance can make an enormous financial difference.

For the smaller incidents, it is worth slowing down and doing the math first.

If You Do File, Document Everything

Once you decide a claim makes sense, good documentation can make the process much easier.

Take plenty of photos and videos before cleanup or repairs whenever it is safe to do so. Keep repair estimates, receipts, and a list of damaged belongings.

At the same time, don't allow additional damage to occur just because you are waiting for an adjuster. If a pipe is leaking, shut the water off. If a roof is damaged, take reasonable steps to protect the house from additional rain.

Just make sure you document what happened before making major permanent repairs whenever possible.

Review Your Insurance Before Something Happens

The worst time to learn what your policy covers is when you are standing in your kitchen looking at water coming through the ceiling.

Take a few minutes now to understand:

• Your deductible

• Your coverage limits

• Any important exclusions

• Whether you have replacement-cost coverage

• Your water-damage coverage

• Your liability limits

• Who you should call before filing a claim

And perhaps most importantly, know your insurance agent before you need your insurance agent.

The Bottom Line

Homeowners insurance is extremely valuable, but it doesn't necessarily make sense to use it for every repair.

For a smaller loss, first figure out the likely repair cost and compare it to your deductible. Then consider your claims history and talk with a knowledgeable insurance professional before deciding whether to file.

Sometimes paying a smaller repair yourself may be the better choice. Other times — as I learned with my own minor accident — your history may make filing the claim an easy decision.

The important thing is to make that decision before automatically opening a claim.