A small home insurance claim can raise your premium for years and cost you a claims-free discount. Before you file for minor damage, subtract your deductible from a repair estimate and compare what’s left with the extra premiums you’d pay. If the premiums come out higher than what’s left, pay for the repair yourself.
Say a washing-machine hose bursts and the floor repair runs $3,000. With a $1,000 deductible, the claim pays $2,000, which looks like an easy call.
It isn’t. The National Association of Insurance Commissioners says the number and kind of claims you file often affect what you pay. A claim can affect your premium for about three to five years, according to GEICO. If the claim and a lost claims-free discount add $500 a year to your premium, you’d pay $1,500 to $2,500 more over that stretch to collect a $2,000 check. Filing leaves you $500 better off than paying for the repair yourself if the increase lasts three years, and $500 worse off if it lasts five.
Switching insurers won’t erase the claim. Most home and auto insurers report claims to CLUE, a shared database run by LexisNexis that keeps up to seven years of them. A new insurer can check it when you apply or ask for a quote. It holds auto claims too, so run the same math on a fender bender.
Some insurers log a call about damage as a claim even if you never file, so do the math with your policy and your agent before you phone the claims line.
- Get a contractor’s estimate for the repair.
- Subtract your deductible to see what a claim would pay.
- Ask your agent how much one claim would raise your premium, for how many years, and whether it would end a claims-free discount.
- File only if the payout clearly beats the extra premiums.
The policy exists for losses you can’t absorb. File right away for an injury to someone at your home, damage to someone else’s property you could be liable for, or a repair that would drain your emergency fund. Liability coverage pays for your legal defense and any award, up to its limit.
Small losses you’ll cover yourself anyway are a risk you’re already carrying, so raise your deductible and pay a lower premium.
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