Should You Forgo a Small Damage Claim?

A study by found that filing just one homeowner’s insurance claim boosts annual premiums by a national average of nine percent, up to 30-plus percent depending on your location. That noted, it’s not always worth it for you to file that claim. Below are some basic rules of thumb to gauge whether or not to file, shared by MarketWatch personal finance columnist Jennifer Waters.

Why it may be worth the sacrifice to pay for home damage out of pocketDon’t file a claim if:

  • The claim is smaller than the deductible — in large part because it won’t be covered. Also consider that you’ll be putting the claim on your insurance record (and in the shared Comprehensive Loss Underwriting Exchange, or CLUE, database), and it will stay there for three to seven years. Carefully consider the risk-reward profile.

“Before filing a claim, estimate how much your potential settlement would exceed your deductible. Then compare that to the potential rate increase,” recommended Kimberly Lankford of Kiplinger’s Personal Finance.

  • You may not be covered by the claim. After heavy rains and hurricanes, many homeowners mistakenly think they have flood insurance, although traditional homeowner’s insurance does not cover water damage caused by floods. That comes in the form of separate coverage underwritten by the federal government through the National Flood Insurance Program.

“But guess what? If you file a claim with your insurance company for something that isn’t covered, the claim itself doesn’t go away,” Waters said.

  • You file claims often. If you’re a consistent claimant, you’re considered high-risk and you will get slammed on rates. It is not unusual for a homeowner to file two claims in a 10-year period, but the same number of claims within a three-year timespan will set off the alarms at insurance companies.
  • It’s really more of a home-maintenance project. If your fence is rotting so much that you know that one big storm will blow it over, budget the household finances for a new fence. It’s another one of those ‘risk versus reward’ situations. On the plus side, better maintained homes generally get better premiums.

Many of the same rules apply, in some form, to an auto insurance claim. If you have an accident, or even a moving violation, on your record already, skip the small claim.

“Auto insurers quote you rates based on the kind of driver you seem to be,” wrote Selena Maranjian of Daily Finance.

Furthermore, if an auto insurance claim will pay out little more than your deductible, you may want to eat the cost of the damage (or raise your deductible). Finally, akin to the home-maintenance rule, if you could have prevented the damage, insurance will not cover your claim.

“Negligence is not reimbursable,” said Maranjian.

You will want to remain informed about the items on your CLUE report, just as you would a credit report. As a consumer, you are able to request a copy of your CLUE report, and Waters suggests you do so at least once a year to check for accuracy or unrelated information that could inflate your rates. Also, if you would like to research how much a claim will raise your homeowner’s insurance rates in your state, you can see the study at


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