Unfortunately, not being careful with your homeowners insurance claims could turn a real-life disaster into a financial catastrophe. Submit too many claims? Your premiums might rise. Submit the wrong claim? Again, your premiums might rise—and you'll still have to cover the cost of the damage.
Truth be told, homeowners insurance isn't as simple as "Submit claim, get paid." To save money in the long run, you need to think carefully about whether you want to file that claim. Here are five scenarios that might end up costing you.
1. When the cost is within 20% of your deductible
Don't treat your homeowners insurance deductible like your medical insurance deductible. Just because your insurance company will cover part of the cost doesn't mean you want it to do so.
"I would never recommend that one of our customers turn in a claim that, after the deductible, is only going to pay out a couple hundred dollars," says Will Tucker, who owns an independent insurance agency, Tucker Agency. "We advise our customers to pay cash until it becomes painful."
Submitting multiple small claims may ultimately make you "uninsurable," Tucker says. Soon, you'll see higher premiums, and you might even struggle to switch insurance providers.
Financial planner R.J. Weiss advises homeowners to "avoid filing a claim within 20% of your deductible." So if your deductible is $2,000, don't submit anything to your insurance if it costs less than $2,400.
2. When it was avoidable
We're going to use a very, very broad definition of "avoidable," here. Avoidable doesn't mean "your fault," or even anyone's fault, per se. Think about it from the insurer's perspective: Would better locks or a different property location have thwarted the thief who stole your television? Would a newer stove or frequent maintenance have prevented that kitchen fire?
"Not all losses are created equal," Tucker says. Take hail, for instance: There's nothing you can do to keep a freak storm from battering your roof.
"A theft or fire claim is always going to be worse," Tucker continues. That means your post-claim insurance premium increase will be proportionately worse, too.
While this shouldn't keep you from filing a claim if your losses were severe, consider paying cash if you can afford to do so.
3. When you are responsible
If you're filing a claim because of homeowner negligence, consider carefully whether you can afford to fix the problem yourself first.
"If the damage is due to your lack of maintenance, your claim may be denied," says Katie Tu, an insurance specialist with QuoteWizard. Even if your claim is denied, it's still noted on the Comprehensive Loss Underwriting Exchange—or CLUE—which means that it can affect your premiums.
If your insurance company believes you're not capable or interested in maintaining a safe home, that can affect your insurance, too. Immediately maintaining or repairing any issues when they show up "can prevent you from filing frivolous claims," Tu says.
4. When your local agent tells you not to file
Having a local insurance agent can be a lifesaver, especially if you're trying to avoid premium increases.
"I take pride in advising my clients and helping them decide the best course of action regarding the claims," says Julian Conner, a private insurer with Mints Insurance Agency. "If you call the carrier directly, they'll often funnel you right to the claims department. Even if you're only looking for the answer to a couple of questions, this often triggers the start of the claims process."
Talking to a local or independent agent first can save you the trouble of filing a claim you really shouldn't have—and which also might increase your premiums.
"Most agents have seen a lot," Weiss says. "In addition, many agents can call your insurance company—without giving your name and policy number—to inquire about the chances of your claim being denied."
5. When there aren't long-term home repercussions
Here's a tricky homeowners insurance claim scenario: water damage. Let's say a pipe burst in your second-floor laundry room, soaking the first floor. Your deductible is $3,000, and repairing the pipes and cleaning the water costs about $3,500. You shouldn't put in an insurance claim ... right?
Maybe you should. If damage might worsen over time, filing a claim now is the right course of action.
"You may be able to dry your floor and call it a day," Conner says. "But did the moisture seep into the subfloor, starting the beginning of a mold problem? If you report this claim right away, the loss will likely be covered. However, if you wait two years until you discover the mold, the carrier will likely deny it."
Figuring out which insurance claims are worth making can be a tricky business. Knowing how best to evaluate a problem—and understanding whom to call if you can't make a decision—will prevent you from paying more in homeowners insurance costs over the long run.