Christine Moriarty of Bristol, Vt. paid homeowners insurance premiums for nearly a decade before she filed a claim. A lightning strike fried her laptop computer. Several years later, she filed a claim for a puff-back of her furnace that left four rooms soot-covered.
When trying to decide if you should file a small insurance claim or pay for it out of pocket, the answer is not clear-cut. How do you know if your rates will go up if you file? Will you get dropped at renewal time?
"This is where consumers are really vulnerable because they don't have the information, and that's because there are no hard-and-fast rules in the insurance industry," said Amy Danise, spokeswoman for Insure.com.
It doesn't help that factors triggering rate "surcharges" after a claim vary widely by company and even by state.
This advice from insurance experts can help you decide whether it's worth it to file.
Do file if …
It's a BIG claim. The purpose of insurance for consumers is to protect them from financial disaster, not small expenses. Experts agree it is not wise to make small claims, although they disagree on what small means. To some that's $500. Others say $1,000. It will depend on what you can afford to pay out of pocket, experts say.
You haven't had recent claims. Filing a single claim might have no effect on your auto or homeowner premiums, said Christina Hubbard, auto underwriting team manager at State Farm.
You have first-time accident forgiveness. This get-out-of-jail-free card is offered by some auto insurers. With some companies, you're only eligible after you've been accident-free for a number of years. If your insurance has this feature, lean more toward filing a claim.
Injuries are involved. If there's a chance someone else in the incident could claim they were injured, file a claim to protect yourself from an injury lawsuit.
You've had the policy a while. Longtime customers who make few or no claims generally get more leniency than new customers who file claims.
Don't file if …
Your deductible is higher than the value of your claim. Your deductible is the amount you have to pay before your insurance kicks in. "If it were only a couple hundred bucks over my deductible, I would probably absorb that myself just to keep my insurance record clean," Danise said.
You have recent moving violations. Some auto insurers will use driving violations as factors to raise your rates, especially if you filed claims too.
You've had other recent claims. Filing several claims in the same year might trigger an increase, Hubbard said. So, if you're
facing numerous claims, you might want to pay one of the smaller ones out of pocket, she said.
Maybe file if …
You're at fault in an accident. If so, you have a good chance of facing a rate increase. Fault might be obvious in a car accident where you are distracted and rear-end the car in front of you. If you have several of those, expect a sizeable increase. But an insurance company might also view it as your fault if you neglect to do proper maintenance on your home — fail to detect termites or fix a leaky roof that causes other damage. If an auto accident is clearly the other driver's fault, you might want to file a claim to protect yourself in case that driver is uninsured or underinsured, Danise said. Auto premiums generally don't rise if it's not your fault.
Things you should know
It would be easier if consumers could rely on a specific formula to determine whether they should file a claim — comparing the amount they receive from a claim versus their expected rise in premiums over the next few years. Unfortunately, it's not that easy because insurance rates have so many moving parts.
Be cautious about calling your agent. If you're uncertain about filing a claim, don't impulsively pick up the phone to talk with your agent. Some agents are obligated to note in your file that you had an incident, even if you never file a claim. That alone could increase your rates, said Joel Ohman, a Certified Financial Planner and the founder of the rate-comparison site
InsuranceProviders.com. "That's good to know before you start blabbing away about things, not knowing it might unintentionally raise your rate," he said.
However, your agent is also the best person to help you evaluate your options, said Hubbard of State Farm, so talk to your agent about the insurer's practices.
You may want to raise your deductibles. It's generally unwise to make lots of small insurance claims. So you might as well raise your deductibles and pay lower premiums. A suggestion: $1,000 on auto and $2,500 on homeowners.
Get a CLUE. If you want to know what an insurance company knows about your claims history, get your Comprehensive Loss Underwriting Exchange (CLUE) reports. Access free reports for personal property and auto at ChoiceTrust.com.
Get the surcharge schedule. Ask your agent for this. It shows how much rates will increase after a claim. They're difficult to read, though. So you might ask your agent to help decipher it.
Gregory Karp is author of "Living Rich by Spending Smart." E-mail him at firstname.lastname@example.org .