Don't Even Consider Filing an Insurance Claim Until You Do This First

People purchase insurance for a reason. The point of buying coverage is to share the risk of loss. When a covered event happens, the insurance company pays to repair or replace property like a vehicle or a home or personal property in the house.

When policyholders make an insurance claim, though, their premiums typically go up afterward. After a car accident claim, for example, auto insurance rates could jump by as much as 92% in some states (although an increase between 30% and 60% is more common). Since insurance will be more expensive in the future, it's important to consider whether making a claim is actually worth it before moving forward.

Before any insured policyholder goes ahead and asks an insurer to cover a loss, there's one crucial thing they must do first.

Always find out what the deductible is before making a claim

The first and most important step to take before making any insurance claim is to figure out what the deductible is on the policy.

The deductible is the amount the insured person would have to pay for a covered loss before an insurer provides any help with the rest of the costs. Say, for example, a property owner incurred $2,000 worth of damage due to a kitchen fire and was considering a homeowners insurance claim.

That homeowner should check their deductible. If they have a $1,000 deductible, the insurer would expect them to cover the first $1,000 in losses, and the insurance company would then pay the other $1,000 to fix the damage.

It might make sense to do that, but the homeowner may also decide it's not worth incurring the cost of increased premiums for years to come just to get a $1,000 payout. Homeowners insurance premiums usually rise about 7% to 10% following a claim. So a policy that costs $1,800 might cost $1,980 for the next three to seven years until the claim drops off the homeowner's record. If the homeowner gets stuck with an extra $1,260 in premiums because of a claim that paid out $1,000, that's not a good deal.

If the fire did $10,000 in damage, though, then making a claim would likely make sense. And if it caused just $500 worth of loss, it would be better to skip making a claim. The insurer would not actually pay anything in that situation.

Everyone with home insurance or auto insurance should be sure to check their policy documents to see exactly what their deductible is when any covered loss happens. That way, they can see exactly what the insurer would pay them and then decide if facing the premium increase is worth getting that cash.

Consider checking deductibles before a covered loss happens

While checking a deductible before making a claim is crucial, for many people it's actually best to figure out what their deductible is before something goes wrong. That's because it will be too late to change it once it comes time to file a claim -- and no one wants to discover they can't afford repairs because they don't have the money to cover their policy deductible.

A lower deductible comes with higher premiums. But any driver or homeowner who discovers that paying their deductible would be a serious financial burden may want to just pay the extra costs for reducing their out-of-pocket expenses when a covered loss happens. Paying a little more in predictable monthly premiums could fit more easily into many people's budgets than suddenly covering $1,000 in unexpected costs after tragedy strikes.

Insurance agents will provide information about a deductible, and the information is included in policy language as well. Give it a look today to see whether the deductible is affordable. If it's not, making the call to the insurer to change it ASAP is important -- before it's too late.