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Man reviewing an insurance policy before deciding whether to file an insurance claim

Small Insurance Claim? 5 Questions to Ask Before You File

/2 Comments/in , /by Mary Hunt

Should you file an insurance claim or pay the bill yourself? Sometimes a small loss really is better handled out of pocket. Other times, especially when another person or property is involved, staying quiet can leave you exposed. Before you decide, here’s how to tell the difference, what to check in your policy and the five questions worth asking first.

Man reviewing an insurance policy before deciding whether to file an insurance claim

Quick note before we start: I’m not an insurance agent or a lawyer, and the rules about reporting accidents and losses vary by policy and by state. Read your policy. If you’re not sure what you’re required to report, or whether something’s covered, contact your insurer, agent or state insurance department.

You pay a small fortune for insurance. Then something breaks and you hesitate to use it, because who wants to find out what a claim does to next year’s premium?

Fair question. The answer lives somewhere between filing for everything and filing for nothing.

Insurance is there for the losses that could wreck your finances. Not every dent, drip and cracked window needs to become a claim. But there’s one situation where staying quiet can cost you far more than the repair, and I want you to know exactly where that line is.

Pick a deductible you can actually pay

A higher deductible lowers your premium. That’s the amount you pay yourself before insurance kicks in on a covered loss.

But don’t grab the $1,000 deductible just because the quote looks nice. If coming up with $1,000 tomorrow would mean tearing apart the couch cushions and a minor panic attack, it’s the wrong number.

The right deductible is one your Contingency Fund can cover. Get that in place, and you have room to handle some of the small stuff yourself.

Now for a little arithmetic. Say you’ve got a $1,200 covered loss and a $1,000 deductible. Filing gets you $200. Is filing a claim worth it for $200? Worth pausing over, anyway. Insurers do look at your claims history when they set rates and decide whether to renew.

Small claims aren’t forbidden. Just don’t treat your policy like a maintenance plan.

Fender bender? Different story.

Skipping a claim for your own dented bumper is one thing. Skipping the call when another car, someone’s fence or a passenger is involved is another.

Somebody who feels fine at the scene can wake up three days later with a stiff neck and a doctor’s bill. The damage can look like $400 until the body shop pulls the bumper off. And your policy may require you to tell the company about an accident promptly, even if you never ask it to pay for a thing.

So retire “nobody’s hurt, we’ll just handle it ourselves.” Swap information, take photos, follow your state’s reporting rules, and call your insurer or agent to ask what your policy requires.

That’s protecting yourself.

Water damage? Move fast.

A washing machine hose lets go. A pipe gives out under the sink. Water is spreading across the kitchen floor.

This is not the moment to stand there wondering whether calling the insurance company will put a scarlet letter on your policy.

First, shut off the water if you can do it safely. Grab towels and a wet vac, run fans, and take photos before you start mopping. Water damage is especially time-sensitive because moisture that hangs around can lead to much bigger problems, including mold.

Whether the damage is covered depends on what caused it and what your particular policy says. Sudden accidental water damage may be covered while long-term leaks, maintenance problems, flooding or some types of mold damage may not be.

Living in a condo or apartment? If water reaches a neighbor’s unit, treat it like the fender bender and call.

Maintenance isn’t what insurance is for

Insurance protects against covered losses. It generally doesn’t exist to replace the roof because it wore out, fix a faucet that’s been leaking for six months or clean up after maintenance you kept putting off. Policies generally exclude wear and tear and neglect, and the cause of the damage matters.

So if you notice a leak, damaged roof, cracked pipe or other problem, take care of it before a small repair becomes a very large one.

There’s your frugal strategy: maintain what you own before there’s a claim to file.

Before you file, ask these five questions

For damage involving only your own property and no possible liability to someone else, take a minute before filing a small claim.

  • What’s my deductible?
  • How much will the repair actually cost? (Get a real estimate, not a hunch.)
  • Is this loss covered? (Read the policy or ask. Don’t assume.)
  • Can I comfortably pay for it myself?
  • Does my policy require me to report this even if I don’t file a claim?

Those five questions are much more useful than an arbitrary dollar rule.

Sometimes the smart move is paying for a small repair yourself. Other times, this is exactly why you’ve been paying premiums all these years. Use the insurance when you need the insurance.

 

Question: Have you ever paid for a small repair yourself instead of filing a claim? Would you do it again? Tell us in the comments below.

The expensive mistakes are often the ones we make because nobody told us what to ask first. That’s what I try to fix around here. The Everyday Cheapskate newsletter is full of practical ways to protect your money, spend less where it doesn’t matter and keep more for where it does. Subscribe here and I’ll send it straight to your inbox, free.
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2 replies
  1. Ann Marie says:

    Our homeowner’s insurance was abruptly canceled due to claims from two major storms. The first storm in 2020 caused a town tree to fall on our home, requiring roof, drywall, sidewalk, and fence repairs. The insurance adjuster arrived within a day or two and we were paid quickly, and the town reimbursed our deductible. I touted the company to everyone who complained about their own insurance company. Two years later, also during Covid, the second storm caused a lengthy power outage, preventing our sump pump from working and resulting in over 6 inches of water in our basement. Although we didn’t have flood insurance we had a sump pump failure clause and were paid a flat rate that didn’t come close to covering the loss of personal items and appliances but it helped. No adjuster came and I had to send photos with my claim. A few months later I received a rude letter stating I had not complied with their request to install a battery back-up system to my sump pump. I had never received any such communication from them but I quickly hired someone to perform the work which cost nearly $1,000. When it was time for my policy renewal, I was informed that my policy would not be renewed due to excessive claims! I have now bundled with my car insurance company, which has never increased my rates after several car accidents that were not my fault. Thankfully I haven’t had to file any further claims but with the weather patterns getting worse and another old tree nearby, I’m a bit nervous.

    Reply
  2. Diana says:

    We learned this the hard way! Although our insurance was not cancelled, we were trying to get renter’s insurance for a winter home and two different agents told us no one would insure us because we had 4 claims. Those four claims were actually 2 inquiries with nothing paid, and two small claims on a rider that we were not aware would even be considered claims. We were told that even an inquiry has to be listed because they need to document the “claim”, even when nothing is paid. Needless to say, we were very disappointed that our agent did not make us aware of any of this during the initial phone calls to discuss them.

    Reply

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