Before You File a Homeowners Insurance Claim, Ask Yourself This

Don't rush to file those claims.

The purpose of homeowners insurance is to protect you in the event of property damage, among other things. Imagine a storm hits and causes $15,000 worth of damage to your house. That's money you may not even have in the bank. With a homeowners insurance policy, you might simply pay a deductible -- one that's a fraction of the total damage -- and have your insurer pick up the tab for the rest.

But it doesn't always pay to file a claim against your homeowners insurance. Before you do, there's an important question you need to ask. 

Is the repair bill higher than my deductible?

You may be familiar with deductibles in the context of health insurance and auto insurance -- and they apply to homeowners insurance as well. Homeowners policies come with deductibles that can vary. Yours might be $500, $750, or more -- it depends on the coverage you put into place.

Your deductible is the sum you're required to pay before your homeowners insurance company covers the cost of home repairs. So, let's say your property sustains damage and it will cost $2,000 to fix it. If you have a $500 homeowners insurance deductible, you'll pay that sum and your insurer will cover the remaining $1,500.

The more claims you file against your homeowners insurance policy, the more likely you are to see your insurance premiums rise in time. That's why it's important to file claims judiciously. And in some cases, filing a claim may not even make sense, such as if the cost of repairs is lower than your deductible itself. 

So, let's say you're looking at a $700 repair and your homeowners insurance policy comes with a $750 deductible. In that case, filing a claim is pointless. And, if you're looking at an $800 repair with a $750 deductible, you may just want to cover that cost yourself rather than have to go through your insurance. Doing so could mean getting the job done sooner, and avoiding a scenario where you risk your premium costs going up.

What should your deductible look like?

When it comes to insurance, deductibles and premiums tend to have an inverse relationship -- the higher one is, the lower the other tends to be. If you feel your homeowners insurance deductible is too high, you could look into having it lowered. But be aware that if you go this route, you could end up facing higher premium costs in return. 

If you tend to file a lot of claims, a lower deductible could be worth it. But be sure to run the numbers carefully before making that call.

The age of your home might also factor into your decision. If you have a newer home, you may be less likely to need repairs (though this isn't always the case). In that situation, it could pay to stick with a higher deductible and lower premiums. But if your home isn't in the best shape to begin with, you might consider lowering your deductible, even if it means getting stuck with higher premium costs.