When to file a home insurance claim

When should you file a home insurance claim?

You should file a homeowners insurance claim when the damage exceeds your deductible and the damage is caused by a covered peril. If the damage is only slightly above your deductible, and if you have filed other claims in the past three years, weigh the cost of the repairs against the potential premium increase over the next three years.

Filing multiple claims in a short period of time raises premiums and can lead to nonrenewal. Insurers use a database called the Comprehensive Loss Underwriting Exchange (CLUE) to track claim history, and a pattern of frequent claims signals high risk.

Here are some examples of when it is best to go ahead and file a claim.

• There’s very significant damage to your home, or it is completely destroyed
  This is the type of situation for which homeowners insurance was created. If your home is destroyed by fire or is left uninhabitable following a roof collapse, your insurance will help you get back on your feet again.
• When the repair estimate is more than your deductible
  A pipe bursts in your basement ceiling and floods your recently finished rec room. The cost to repair the damage and associated cleanup is about $7,000, and your deductible – the amount you would pay – is $1,000. In this case, it probably makes sense to file a claim. You’ll still need to pay the $1,000 deductible, but your insurer will cover the other $6,000. If the repair cost exceeds your deductible by only a few hundred dollars, the three-year premium increase is likely to exceed your claim benefit. A single water damage claim raises premiums by an average of 25%, so calculate that cost before filing.
• It’s the first time you’ve filed a claim or haven’t done so recently
  If you’ve never filed a homeowners insurance claim or haven’t filed one recently, especially within the last three years, your insurer is likely to consider it a one-off event. First-time claimants typically see a lower rate increase than repeat claimants. A single fire claim raises premiums by an average of 28%, while a second fire claim raises them by 55%.
• You have an endorsement for the damage
  An endorsement on your home insurance policy expands coverage for certain types of loss. For example, a sewer backup endorsement adds coverage for losses caused by a sewer backup to a policy that might otherwise not cover it.

When should you not file a home insurance claim?

You shouldn't file a home insurance claim when the repair cost is below or near your deductible, the cause of the damage isn't covered by your policy, you have filed one or more claims recently and the damage is not severe, or the damage is from normal wear and tear.

Here are some examples of when you probably shouldn’t file a homeowners insurance claim.

• The damage is small and doesn’t exceed your deductible
  If you have a $1,000 deductible and the cost to repair or replace the damaged item is less than $1,000 or only slightly more, it makes sense to pay it out of pocket. You won’t risk seeing a premium increase and your risk rating will be unaffected. Just treat it more like normal maintenance or wear and tear.
• You don’t have coverage for the damage
  Even claims that are denied get reported into the CLUE database and can negatively impact your premiums or future insurability. Filing a claim for damage you know is not covered creates a record without any financial benefit.
• You have filed several claims recently
  You may not see any impact on your premiums if you haven’t filed an insurance claim recently, but if you filed a series of claims in a short period of time, your insurer will very likely raise your premiums. They might all be very legitimate claims, but you should weigh the benefits with the potential downside before filing.
• The damage is from normal wear and tear
  Homeowners insurance policies include a “failure to maintain” exclusion, which allows the carrier to deny a claim based on lack of proper maintenance or negligence. Homeowners insurance does not cover damage caused by a lack of maintenance. If a roof fails because shingles were past their rated lifespan and not replaced, the insurer can deny the claim under the failure-to-maintain exclusion.

Should you file a home insurance claim? The bottom line

You should always file a home insurance claim for severe damage, but for lesser damage, consider the cost of the repairs compared to the deductible and potential rate increase. When filing, keep these things in mind:

1. File a claim when repair costs exceed your deductible and you have not filed another claim in the past three years.
2. Pay out of pocket when damage is at or near your deductible or when you have filed recently.
3. Never file a claim for damage you know is not covered; denied claims still enter the CLUE database.
4. Remember that claims stay on your CLUE record for five to seven years.

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