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Let's say that a person has a $500 deductible on a home. Let's say that there would be a claim at x dollars. I think it's clear that if the claim was $501, that it wouldn't be worth it, due to higher rates, etc, but if it was $10K, it would be worth it. At what point do you think it would be worth it?

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up vote 5 down vote accepted

An article linked from cnn.com has some great advice, which I think are good rules of thumb.

  • Don't file a small claim. A claim should be at least $200 beyond your deductible before you file, and quite possibly further.
  • Stick with one company. They are more likely to forgive than if you switch companies constantly.
  • If your Homeowners and Auto insurance are through the same provider, they are less likely to want to lose you business
  • Keep your home safe, such that you are less likely to need insurance claims. Put in burglary protection, trim trees, etc.

Also, at least my insurance gives a premium price for those who haven't filed a claim in 5 or more years for homeowners or rental insurance. See if you have a similar discount, will loose it, and guess how much that will cost you over 5 years.

My rule of thumb: Your premium might go up quite a bit, possibly as much as triple, especially for a large claim. But, it is certainly worth it if you are going to get more than triple your premium through your claim. The worst case: Mortgage mandated insurance, which will be about triple your current cost.

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We have had the misfortune to have 3 claims in 5 years. Our rates have not gone up. I know this is not the rule but as you said we have been with the company for 20 years. The claims were not frivolous, and we made adjustments (Got a security system). We have been treated so well through Country that we use them for all of our insurance. –  user4127 Aug 22 '11 at 16:21
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At what point can you not afford the repair, and how will that repair affect your home?

In your scenario, you would be claiming $1, which I could agree is universally bad.

A good tip is to raise the deductible to the point you feel you can cover on your own so you aren't tempted. (It would lower your premium too)

This is what an emergency fund is for. In your examples, if you have $10K in an emergency fund, don't file a claim. If you have no emergency fund, and your roof is missing, I would suggest filing a claim.

If you have no money, but the claim is to fix something that you could ignore (missing a back porch? Lock the back door and don't go out of it) then save the $10K and pay for it out of pocket.

When it doubt, pay for it out of pocket if possible.

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So, let's say that the insurance was only a few hundred dollars a year. You would still pay for it out of pocket rather than file a claim? –  PearsonArtPhoto Aug 17 '11 at 19:54
    
@Pearsonartphoto - yes. I don't have any first hand experience, but the rumor is (Clark Howard radio show) that if you use it, you lose it. So you should only use it in dire situations. –  MrChrister Aug 17 '11 at 20:11
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@MrChrister I think I'm a bit confused. I agree it probably makes sense to set up your deductible in a such a way as to be covered by your emergency fund. However, if my emergency fund has grown since I set up my deductible, why does it follow that the emergency fund should be used instead of filing the claim? Yes the premiums will increase by virtue of filing the claim, but I thought those would be more than offset by the savings from the claim. Could you perhaps expand on your $10k example with more numbers for the old premium, new premium, and deductible? –  Michael McGowan Aug 17 '11 at 20:50
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It seems to me that the implication here is that you should raise your deductible as high as you can stand. Otherwise you are paying for insurance that you will never be willing to use. –  jprete Aug 18 '11 at 1:40
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@jprete - Correct. I want to be forced into using insurance to pay for a catastrophe I cannot afford on my own. –  MrChrister Aug 18 '11 at 7:02
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We learned the hard way on this one. First, our area was hit with what was called an "inland hurricane" where we forced to file a claim as our home received extensive damage.

Within the same year, we also incurred an electrical surge which took out our older big screen tv (one of those big monstrosities that sits on the floor). We were granted full replacement with a more modern flat screen TV, TV stand, and DVD player. It seemed like a no brainer.

We quickly found it as our premium went up that it wasn't that sweet. It wasn't a huge increase, but it definitely has us truly evaluate if it's really necessary filing a claim.

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