When disaster strikes at home, like a pipe break or a flooded bathroom, the first question many homeowners ask is, “Should I file an insurance claim or handle the repairs myself?” Making the right choice can save you money, preserve your insurance benefits, and reduce stress. Let’s break it down so you can make the best decision for your situation.

Key Factors to Consider

1. Your Deductible

Your deductible is the amount you’re responsible for paying before insurance kicks in. For example, if your deductible is $5,000 and the repair costs $7,000, your insurance will only cover $2,000. On the other hand, a $1,000 deductible means you’d pay less out of pocket for the same repair.

2. Claim History and Premiums

If you’ve never filed a claim, you’re likely receiving a claim-free discount, which can lower your premium by 10-20%. Filing a claim could result in losing that discount, increasing your premium by $200-$400 annually for the next five years. Additionally, multiple recent claims can lead to policy cancellation, making it difficult to secure new coverage.

3. Coverage Limits and Exclusions

Not all damages are covered by insurance. For instance, certain types of water damage might be excluded, or your policy may have limits that don’t fully cover the cost of repairs. Always review your policy to understand what’s included and excluded.

Real-Life Scenarios

Let’s look at three families to see how these factors play out:

The Smith Family

  • Deductible: $5,000
  • Claim Amount: $10,000
  • Claim-Free Discount: $400/year

If the Smiths file a claim, they’ll pay $5,000 for the deductible and lose their $400/year discount for five years—a total of $7,000 out of pocket. Filing the claim only covers $3,000 beyond their costs, so they might decide to pay for repairs themselves.

The Jones Family

  • Deductible: $1,000
  • Claim History: Two claims in the last 24 months
  • Claim Amount: $10,000

Despite a low deductible, the Jones’ insurance carrier may drop them for filing another claim. Losing coverage makes it difficult to find a new policy. Paying out of pocket is likely their best option to avoid this risk.

The Griggs Family

  • Deductible: $1,000
  • Claim History: No prior claims
  • Claim Amount: $10,000

The Griggs are first-time claimants, making them ideal candidates to file. Although they’ll lose their $400/year discount, the insurance payout of $9,000 significantly outweighs their deductible and discount loss.

When to File a Claim

  • The damage exceeds your deductible by a significant amount.
  • You haven’t filed a claim before and don’t risk losing your policy.
  • Your policy clearly covers the damage, and you’re not close to your coverage limits.

When to Pay Out of Pocket

  • The repair costs are close to or below your deductible.
  • You have a history of recent claims and risk losing coverage.
  • The damage isn’t covered by your policy, or filing would result in minimal reimbursement.

Tips to Reduce Future Claims

Being proactive can help you avoid future damage and the tough decision of filing a claim:

  • Perform regular maintenance on plumbing, HVAC systems, and roofs.
  • Address small issues immediately to prevent them from becoming larger problems.
  • Understand your policy coverage to ensure you’re protected against common risks.

Conclusion

Deciding whether to file an insurance claim or pay out of pocket isn’t always easy, but understanding these key factors can help you make an informed choice. Remember, insurance is there to cover significant expenses beyond what you can reasonably afford.

If you’re dealing with water damage, mold remediation, or biohazard clean up, Innovative Restorations is here to help. We’ve guided thousands of homeowners in Middle and East Tennessee through these situations. Contact us today for expert advice and service!

Josiah Kessie is the owner of Innovative Restorations LLC. 
He lives with his wife and 3 children in Middle TN Josiah started his business in 2005 and is a TN licensed Contractor as well as IICRC certified in water damage, mold and trauma clean up and Dept of Ag certification and EPA lead paint certified.