When Should You File a Home Insurance Claim?

What to Consider When Deciding to File a Home Insurance Claim

Before filing a homeowners insurance claim, consider the following questions:

How Much Will Repairs Cost?

Websites such as HomeAdvisor, Costimates and Thumbtack can help you estimate the cost of home repairs. You can also get quotes from local home repair services or contractors.

If personal property was damaged or stolen, check whether your policy offers replacement cost coverage (which pays for comparable new items) or actual cash value (which reimburses you for the items' current, depreciated value). The actual cash value of older belongings may be substantially less than they cost to replace, which can affect your decision to file a claim.

How Much Is Your Deductible?

Your deductible is the amount you pay toward repairs before insurance pays out. Home insurance deductibles may be dollar amounts (such as $1,000) or percentages of your home's insured value (such as 2%). Homeowners insurance policies may also have special deductibles for flood, earthquake, hurricane or wind and hail damage.

Here's how a home insurance deductible works. Say you file a claim for a $20,000 loss, your home is insured for $250,000 and your deductible is 2% ($5,000). You'd pay your deductible of $5,000 and your insurance payout would be $15,000.

If you have $1,500 worth of damage and a $1,000 deductible, insurance only pays out $500. Due to the impact filing a claim can have on your premiums, you may be better off paying for repairs out of pocket.

Can You Cover the Repairs Without Filing a Claim?

If it's a relatively small loss and you have the money to pay for repairs or replace your property, covering the cost yourself could be a better option.

Will the Claim Cause Your Premiums to Rise?

When you file an insurance claim, the carrier may increase your premiums. At minimum, you lose any discount for being claim-free. A single fire-related home insurance claim causes premiums to rise an average of 29%, according to data from Insurance.com; two such claims can spike your premiums by 60%.

Have You Filed a Claim Recently?

When you file a claim, your insurance company checks your home's Comprehensive Loss Underwriting Exchange (C.L.U.E.) report. If any claims were filed in the past seven years—even by a prior homeowner—filing additional claims could cause your premiums to rise. If you've owned your home for less than seven years, order your home's C.L.U.E. report from LexisNexis to see if a previous homeowner filed a claim during that period.

File too many claims within a seven-year period, however, and insurance carriers may decide your home is too risky to insure. Insurers can cancel your policy if they believe you've become a greater risk, or may refuse to renew your policy when it expires, making it difficult to get homeowners insurance elsewhere.

When Filing a Home Insurance Claim Is a Good Idea

Here are some times you should file a home insurance claim.

You Have a Major Loss

Homeowners insurance is meant for major losses, not minor repairs. Some losses are more costly than others: According to the Insurance Information Institute, the average fire and lightning-related loss was $83,519 in 2021. If your home is destroyed by a hurricane or burned to the ground, you'll need to file a claim to rebuild your home.

You Believe the Loss Is Covered

In general, homeowners insurance covers injuries on your property; damage or destruction of your home's structure and your belongings due to fire, wind, hail, lightning, smoke, theft or vandalism; and some types of water damage. It also pays additional living expenses if you have to live elsewhere during repairs.

Homeowners insurance generally won't cover floods, earthquakes, landslides, sinkholes, sump pump failures, or backups from septic tanks, drains or sewer lines. Mold, plumbing failures and certain kinds of water damage may not be covered either; nor is damage that is a result of poor maintenance or normal wear and tear.

Even a claim that's denied will go on your C.L.U.E. report, so file only when you're confident the loss is covered. If you're not sure, you can ask your insurance agent before deciding whether to file a claim.

You Haven't Filed a Claim Recently

Even a history of claims within the past seven years shouldn't stop you from filing a claim for a major loss. But if there are no claims in the past seven years, you can feel more comfortable filing a relatively small claim, such as a $10,000 roof repair.

The Damage Is Significantly More Than Your Deductible

If your deductible won't eat up most of your insurance payout—for instance, you have $7,500 in damage and a $1,000 deductible—it may be worthwhile to file a claim.

Here are some examples of when you should—and shouldn't—file a homeowners insurance claim.

• Should: A major hailstorm damages your roof. Gale force winds might then make matters worse when it knocks a tree branch onto your home. Your claim is likely to be approved because you couldn't have prevented the wind or hail.
• Shouldn't: Your 20-year-old roof starts leaking after heavy rain. It also has clogged gutters, lots of loose shingles and other signs of neglect. Your claim is likely to be denied because the damage appears due to your negligence.

Alternatives to Filing a Home Insurance Claim

If you decide not to file an insurance claim, here are some other ways to pay for repairs.

• Use your emergency fund. After tapping your emergency fund, replenish it as soon as possible. Stashing the cash in a high-yield savings account can grow your savings faster.
• Cash in investments. Weigh the tax implications first; for example, selling stocks may trigger capital gains taxes.
• Get a personal loan. Personal loans from banks, credit unions and online marketplaces can be used for any purpose. They generally don't require collateral; interest rates may be fixed or variable.
• Use a home equity loan or home equity line of credit (HELOC). Both forms of credit use the equity in your home as collateral. Home equity loans are dispersed as lump sums; a HELOC opens a credit line you can use as needed and pay back over time. If you don't repay the loan or HELOC, the bank may foreclose on your home.
• Use a 0% introductory APR credit card. A card with an introductory 0% annual percentage rate (APR) on purchases could finance smaller home repairs. Don't max out the card; create a plan to pay off the balance before the promotional period ends.

The Bottom Line

Deciding when to file a homeowners insurance claim requires weighing several factors. If filing a claim leads to higher insurance premiums, raising your deductible could lower your premiums again.

Maintaining good credit can also help keep your homeowners insurance costs down. Insurance carriers may check your credit-based insurance scores before issuing coverage. While these aren't the same as regular credit scores, they're based on many of the same factors, so checking your credit score is a good gauge of what your credit-based insurance score may be. A higher score could mean lower insurance premiums.