When Is It Worth Filing a Home Insurance Claim?

How Insurance Claims Work and When They’re Worth It

A young couple look at one another, stressed out, as they hold papers while drinking coffee in their kitchen and deciding whether to file a home insurance claim.
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katleho Seisa / Getty Images

Damages and losses covered by homeowners insurance are more common than you might think. Say you left your phone in your car while you ran into the grocery store but when you get back to the car, your window is broken and your $1,000 phone is gone. Or maybe a storm caused you to lose power for days; now everything in your fridge and freezer is garbage, and replacing it will rack up a serious grocery bill.

While you can file a home insurance claim in these scenarios, is it worth it? We’ll explain what to consider when making this decision, and when it’s best to make a claim.

What Is Home Insurance?

Home insurance financially shields you against losses due to certain disasters, accidents, thefts, and liabilities involving your home or property. Standard homeowners policies typically cover your home’s structure, personal belongings, additional living expenses, and liabilities arising from injuries or property damage caused by you or your family members and pets.

Most people think of home insurance as covering only significant damage arising from fires, natural disasters, and other perils, but policies may also cover a surprising number of smaller items and less-serious scenarios:

  • Drones
  • Tombstones
  • Sheds, gazebos, and patios
  • Personal belongings for kids away at college
  • Items you travel with, such as luggage, tablets, and smartphones
  • Spoiled food from power outages originating on your property
  • Cost of fixing credit reports in identity theft cases
  • Unauthorized ATM, credit, or debit card use

How Does a Homeowners Insurance Claim Work?

Always call the appropriate authorities first in cases of theft, fire, vandalism, and other emergencies. Once it’s safe, you can contact your insurance agent or company to file a home insurance claim.

Your agent will guide you through the process, but be sure to ask about any forms or supporting documentation you’ll need to submit. You’re also required to take reasonable measures to prevent further losses, such as shutting off the water in case of a burst pipe.

For bigger claims, an adjuster may visit your home to determine the extent of the damage and estimate repair costs. The insurer may issue settlement checks directly to you or in some cases, to both you and your mortgage servicer. In this case, you would endorse the check, and your mortgage company would then release money as the work progresses.

If your personal belongings were damaged or stolen, a claims adjuster likely won’t visit. In these cases, your insurer might simply send you a check for the estimated loss (after subtracting deductibles and potentially depreciation). If you have replacement-value coverage for items, you may need to submit purchase receipts showing you actually replaced them.

Why Claims Aren’t Always Worth It

Filing a home insurance claim is usually straightforward, but is it something you should do? Not necessarily. Here’s why filing a claim could end up costing more than you’d expect.

Deductibles

Your deductible has a huge effect on whether it’s worth filing smaller claims. You could have $500 worth of spoiled food, but if your deductible is $500, it doesn’t make sense to file a claim. Once you pay your deductible, there’ll be nothing left for your insurer to pay out.

Loss of a Claim-Free Credit

Insurers may give you a discount on your policy if you haven’t filed a claim in a certain number of years, often three to five. While discount amounts vary, you could save $200 to $500 per policy period. Filing a claim means you could lose that discount until you’ve again been claim-free for the required number of years. In other words, a smaller claim could actually cost you money in the long run.

Premium Increases

Insurance companies may increase your premium after you file a claim because they think you’re more likely to file again in the future. You could pay more out of pocket in premium increases than if you had just replaced or repaired the items yourself.

The insurer may also choose not to renew your policy if you’ve filed several small claims in a short amount of time. And that could lead to a potentially larger and more expensive problem.

Difficulty in Getting Insurance

Home insurance claims typically go into a national claims history database called the Comprehensive Loss Underwriting Exchange (CLUE) and stay there for five to seven years. As your number of claims increases, your chances of finding affordable coverage may decrease. And if you have more than two claims within five years, you may have a hard time finding home insurance at all.

Only claims you initiate show up on your CLUE report. Inquiries to your insurance agent about coverage possibilities or estimated costs do not.

It’s generally not worth filing a claim when the loss or damage is worth less than your deductible. But even if the loss exceeds your deductible, reconsider filing (or simply don’t file) a claim in the following situations:

  • For a minor amount, typically less than a few thousand dollars
  • Not a covered event in your policy
  • One of a few that you’ve filed in recent years

You can get a free home and auto CLUE report once every 12 months because of the Fair and Accurate Credit Transactions Act.  

When Is a Homeowners Insurance Claim Worth It?

Given the effects of filing a claim, it’s not something to take lightly. Before filing, weigh the potential costs and benefits for your situation. Here’s when filing a claim may be worthwhile:

No Recent Claims

As mentioned above, having more than two claims in the last five years can make your home difficult to insure. If you have filed fewer or no claims, it may be worth making a claim if the amount is substantial enough that it warrants the potential ding on your CLUE report.

Serious Losses or Damages

It’s best to think of homeowners insurance as a resource for catastrophic events or substantial problems. If that describes your circumstances, it probably makes sense to file a claim, especially if its value is significantly above your deductible. If in doubt, ask your agent about whether or not it’s a good idea to submit a claim in your situation.

Key Takeaways

  • If you’ve filed claims in recent years or only have a minor issue, it may not be worthwhile to file a claim.
  • When you file a claim, it’s added to your CLUE report, a tool insurers use when deciding whether to approve your policy or what to charge as your premium. The more claims you have, the more challenging it is to find affordable insurance or insurers willing to take you on.
  • Your insurer may choose not to renew your policy if you have several small or large claims. The company can also increase your premium every time you file a home insurance claim.
  • It’s usually better to file a claim with your home insurance company when there are substantial or catastrophic losses.