Pros and Cons of Filing a Homeowners Insurance Claim

Female homeowner inspects shingle damaged in storm to consider insurance claim.

If something goes wrong with your home, you may be quick to file a homeowners insurance claim. That’s what it’s there for, right? According to the Insurance Information Institute, 6% of insured homes had a claim in 2020. Be that as it may, it doesn’t always make sense to file a claim if doing so could result in higher premiums down the line.

Whether or not you should file a claim can depend on your unique situation, your deductible, and other important factors. That’s why we wanted to highlight a few things that may be helpful for you to consider if you’re faced with that decision. 

How does homeowners insurance work?

Let’s first back up and review how homeowners insurance works. You usually pay a premium to keep your policy active. Every policy and insurer are different, but a standard policy typically provides some level of:

  • Structural coverage: Covers you if your home is damaged or destroyed by a covered event.
  • Personal property coverage: Covers you if your personal property is damaged or destroyed during a covered event, which often includes theft. Covered items generally include things like furniture, clothing, and electronics.
  • Liability coverage: Covers you if there’s an accident on your property. It can go toward medical and/or legal fees if someone is injured.
  • Additional living expenses: If a covered event causes damage that leaves you unable to live in your home, your policy will likely cover living expenses like hotel bills and meals.

Mortgage lenders often require homeowners insurance. If you decide to file a claim, you’ll likely have to meet your deductible before your insurer pays their share. This is usually separate from your regular premiums and may be a flat dollar amount for some covered events. For others, such as hurricanes, your deductible might be calculated as a percentage of your total coverage. A lower deductible typically translates to a higher premium and vice versa. Your deductible might reset annually or on a per-event basis.

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Pros of filing a homeowners insurance claim

If you experience a covered event that damages your home or personal property (or leaves someone injured), you can file a homeowners insurance claim. After you meet your deductible, your insurer will kick in their portion. Filing a claim often makes sense when you’re up against significant expenses.

For example, let’s say you added a rider to your policy that includes hurricane coverage. If a hurricane seriously damages your home, the cost to repair or rebuild could be astronomical. Paying your deductible and letting your insurance company foot the bill for everything else could be a smart financial move.

Cons of filing a homeowners insurance claim

It could increase your premiums

When determining your premiums, insurance companies consider your likelihood of filing a future claim — which could cost them money. The higher your perceived risk, the more likely you are to pay more in premiums. Your claims history tends to play a direct role. If you’ve filed homeowners insurance claims in the past, your insurer may see it as a red flag that you’ll continue to do so in the future.

It could negatively affect your insurance score

One Matic survey found that 45% of respondents didn’t know that their credit impacts their insurance rates (and their ability to get coverage). In many states, your credit-based insurance score is one factor that can affect your premiums. It’s used as a way to predict whether or not you’ll file future claims. Research suggests that folks with a lower credit score may be more likely to file claims when compared to those with a higher score.

Your credit-based insurance score is based on your credit score and claims history. Even if you file a claim that results in no insurance payout, it can still negatively affect your insurance score. If that score drops, you’ll probably pay higher premiums in the future. Depending on your situation, it could even make it harder to qualify for coverage.

Should I file a homeowners insurance claim?

It really depends on your deductible and your expected financial responsibility. There’s no right or wrong answer, but this checklist can get you asking the right questions:

  1. Was the damage caused by a covered event? Check your policy to be sure.
  2. If so, what is the estimated cost to remedy the situation? You can consult the appropriate experts to give you an estimate.
  3. How do these costs compare to your deductible? If it’s less than your deductible, you might be better off paying out of pocket and leaving your insurance company out of it. If not, filing a claim could provide financial relief.

Every insurance carrier is different. That’s why it’s so important to do your research. Comparing insurers is a simple way to make sure you’re getting the right policy for your needs. Matic is here to answer your questions and provide a personalized quote from our vast network of A-rated insurance carriers.

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This Blog/Vlog/Website is made available by Matic Insurance Services, Inc. for educational and informational purposes only. Matic makes no representation or warranty of any kind, express or implied, concerning the accuracy, completeness, or suitability of the information contained herein. Insurance products and services described may not be offered in all states. Eligibility for insurance will be determined at the time of application based upon applicable underwriting guidelines and rules in effect at that time. A Matic Insurance Agent can offer you practical guidance and answer questions you may have before you buy.