6 Things to Consider Before Filing an Insurance Claim

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An unsightly dent on your car or roof tiles blown away by a nasty storm may have you running to your insurance company looking to file a claim.

Before you file, though, it’s important to stop and evaluate. It may actually cost you more money in the long run, making paying out of pocket the better option.

Here are six things to consider before you file an insurance claim.

1. Are You At Fault?

Whether it’s a car accident or damage to your home, insurance claims call attention to you as a policyholder. You may see your rates increase if you’re at fault for the incident. After a claim, your insurer sees you as a higher risk, which can bump you to a higher premium tier.

Premium increases vary from one provider to another, and even when you aren’t at fault, a claim could boost your premiums. However, a study from Insurance.com showed that, nationwide, premiums go up an average of 52% after an at-fault accident. The exact increase depends on your state, but the full annual cost of auto insurance after an at-fault accident ranges from $1,572 in New Hampshire to $5,821 in Michigan.

“Many policyholders experience an increase in their annual premiums post-claim,” said Stuart Bensusan, director at Surewise. “This potential rise in cost should be factored into your decision-making process.”

2. Is the Damage Minor?

Whether it’s your home or vehicle, damage will happen. A runaway grocery cart could scratch up your car in a parking lot. You could back into the trash can someone put a little too close to the center of your driveway.

If no one else is involved, you won’t have the risk of legal action or someone filing a claim later if you decide not to file. It’s simply a financial decision.

“For minor incidents involving only your vehicle, such as minor dents or scratches, paying for repairs out of pocket might be more cost effective than filing a claim, especially if the repair cost is less than or comparable to your deductible,” said Gregg Barrett, CEO of Waterstreet Company. “This avoids the potential for premium increases, which can occur even for minor at-fault accidents.”

3. Could the Situation Be Worse Than It Looks?

Damage can be deceiving. What seemed like a fender bender could result in damage to the structure or internal workings of a vehicle. If you’re at fault, the driver of the other vehicle could appear fine at the scene, but injuries like whiplash can take hours to become obvious.

Homeowners insurance claims can be even more complicated. You may think something will only cost a few hundred dollars, only to discover more extensive damage once you’ve hired a contractor. Be sure before you make your decision.

“Replacing a rearview mirror on a car with no additional damage is a pretty clear situation, but mold on a wall after a water leak is not unless you’ve had someone check the flooring and what’s behind the drywall,” said Kate Terry, Surround Insurance CEO.

4. How Will This Impact Your Long-Term Budget?

Insurance claims stay on your policy for at least three years. However, there’s no guarantee your rates will automatically drop once the three years are up. You may need to be proactive in making sure the penalties for your claim are removed.

But there’s another downside to having claims on your record: They could make it tougher to lower your rates by shopping around. Your driving history plays a direct role in your rates.

When you shop for insurance, you’ll need to answer some questions to get a quote. One of those questions will be whether you’ve filed a claim within a fixed period.

It gets worse. Some reports indicate your entire driving history could play a role in the quoting process in the not-so-distant future. As insurers move toward predictive analytics when making quotes, they’ll no longer rely on your answers to the questions and instead will look at the overall risk you pose.

5. Will You Lose Discounts?

Safe driver discounts have become common as insurers seek to put a positive spin on reducing risk. Instead of threatening claims filers with rate hikes, they discount premiums for those who go a certain time period without a payout.

Unfortunately, a claim puts those discounts at risk. You’ll no longer be seen as a claims-free policyholder. Not only could your premiums go up with your current insurer, but you’ll be ineligible for those discounts if you decide to go elsewhere.

“If a potential claim is minor and could jeopardize these no-claim discounts, it’s prudent to evaluate if the financial implications of losing these benefits outweigh the benefits of claiming,” Bensusan said.

6. Were Others Involved?

Even if you don’t file an insurance claim, you may be required to report an auto accident. This is especially true if others are involved.

According to attorney David Goguen, most auto insurers require you to report a vehicular accident even if you don’t file a claim. In some states, you’re also required to file a report with law enforcement or other government authorities. This usually applies if someone’s injured or if damages exceed a certain value.

Reporting the accident also comes with legal protections. Even a fender bender could lead to issues later.

“If you crash with another driver, even if they are clearly at fault from your perspective, they could turn around and sue you later,” Terry said. “You want your insurance company to pay for the lawyer to defend you, so you’ll want to follow the reporting responsibilities that are in the policy.”

It’s important to comply with your policy when it comes to reporting incidents, but filing a claim is optional. Weigh the cost against the risk of future premium increases before you file.

Stephanie Faris is a professional finance writer with more than a decade of experience. Her work has been featured on a variety of top finance sites, including Money Under 30, GoBankingRates, Retirable, Sapling and Sifter.