When to File a Claim vs. When to Cover Out of Pocket

woman on cell phone calling insurance company while looking at her crashed blue car.

People always say that home insurance is “better to have and not need than the other way around.” The trick is figuring out when you need it. Ideally, insurance is a last line of defense. Sometimes, it even makes far more sense to cover the damages yourself without filing a claim.

Here’s are some things to consider:

Excessive Claims

Excessive claims can actually result in policy cancellation. Your insurer is here to help, but excessive claim filings can look suspicious. They might prove that you are more of a cost risk than your insurer is able to cover.

Canceled Policy

When a policy is canceled, that may make it harder to find coverage with another insurer.

Raised Premiums

Claims filed often result in raised premiums, which is a fair trade off when we’re talking about major damages, but maybe not for every cracked window and missing shingle.

There are always exceptions, but there are a number of instances where you generally want to avoid filing a claim to repair the home’s damages:

Poor Maintenance

The damages may have resulted from poor maintenance. Your policy likely won’t cover these losses in any case.

Multiple Claims Previously Filed

You’ve already filed multiple claims in the last decade. If you file claims a lot, that makes you more of a cost risk to the insurer.

Repair Cost

The repair costs will be less than your deductible. This is the big one. Insurance is there to save us money, so if it’s not saving you money, there’s not much point in filing a claim.

And of course, you always want to check your insurance policy before filing a claim to make sure that these particular damages are covered. It’s worth studying your policy when you have the time anyway so that you can buy extra protection wherever you think you might need it.

FAQ’s About When to File a Claim vs. When to Cover Out of Pocket

When should I file an insurance claim?

You should file an insurance claim when the cost of the damage exceeds your deductible and the damage is covered by your policy.

What is the benefit of covering expenses out of pocket?

Covering expenses out of pocket can help you avoid potential rate increases or policy cancellations that may result from filing multiple claims.

How does filing a claim affect my insurance premium?

Filing a claim can lead to an increase in your insurance premium, especially if you have a history of filing claims.

What types of damages should I cover out of pocket?

It may be beneficial to cover minor damages, such as small dents or scratches, out of pocket to avoid potential premium increases.

Are there any drawbacks to covering expenses out of pocket?

The main drawback of covering expenses out of pocket is the financial burden it may impose, especially for larger or unexpected expenses.

How do I determine whether to file a claim or cover expenses out of pocket?

Consider the cost of the damage, your deductible, and the potential impact on your insurance premium when deciding whether to file a claim or cover expenses out of pocket.

Will my insurance company cancel my policy if I file a claim?

While filing a single claim may not result in policy cancellation, multiple claims within a short period could raise concerns for your insurance company.

What are some common scenarios where covering expenses out of pocket is advisable?

Minor car accidents, small home repairs, and minor medical expenses are common scenarios where covering expenses out of pocket may be advisable.

Can I negotiate with my insurance company to cover expenses out of pocket?

It is possible to negotiate with your insurance company to cover expenses out of pocket, especially for minor damages.

How can I minimize the impact of filing a claim on my insurance premium?

You can minimize the impact of filing a claim on your insurance premium by maintaining a claims-free record and considering the potential long-term costs before filing a claim.

Benefits of paying for small damages with personal funds

When facing minor damages, choosing to handle the expenses ourselves, rather than involving our insurance provider, can offer several advantages:

  • Insurance Premium Stability: Our premiums are less likely to increase, as frequent claims can lead to higher rates.
  • Claim-Free Discounts: We often retain eligibility for no-claim discounts by not filing minor claims.
  • Deductible Savings: If the cost of repair is less than or close to our deductible, it’s financially sensible to pay it out-of-pocket.
  • Hassle-Free Process: We avoid the paperwork and time investment required to process a claim.

Determining the cost threshold for insurance claims

Deciding when to file an insurance claim as opposed to paying out-of-pocket depends on a few factors:

  • Policy Deductible: Any damage cost that significantly exceeds our deductible may warrant a claim, while those near or below do not.
  • Financial Impact: If the out-of-pocket cost is within our financial means without undue burden, it may be preferable to avoid a claim.
  • Claim History: We should consider our recent claim history; too many claims in a short time can be detrimental.
  • Long-Term Cost-Benefit: We need to assess whether the immediate savings of not filing a claim outweigh potential long-term costs of increased premiums.


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