How to decide: claim or pay out of pocket
Filing an insurance claim is not always free. Even on a covered loss, a claim may raise your premium for years, so a small claim can sometimes cost more than it pays. It is not guaranteed, and the impact varies by carrier and state. Three factors are worth weighing:
- Payout size: your repair cost minus your deductible. If the cost is at or below the deductible, a claim pays nothing.
- Possible premium increase: water damage is one of the more rate-raising claim types. Industry data (see Sources) puts the average increase near 25 percent, with a single claim ranging about 10 to 40 percent by state. Any increase you may see, held for years, can eat into the payout, though it is not guaranteed and Kansas and Missouri can differ.
- Claim history: insurers may track claims on the CLUE report for up to seven years (they usually look back five). Multiple recent claims can lead some insurers to non-renew, which may matter more than a single payout.
A simple rule of thumb
Filing may make sense when the payout would clearly beat the premium increase you could see over several years and your record is clean. Paying out of pocket may make sense when the repair is close to your deductible, or when you already have claims on file and want to protect your policy. When it is close, get an accurate repair estimate first, and check with your insurer or agent, since rules can differ between Kansas and Missouri.
Frequently asked questions
Should I file a water damage claim or pay out of pocket?
Filing may make sense when the repair cost is well above your deductible and you have a clean recent claim history, so the payout would likely beat any premium increase. Paying out of pocket may make sense when the repair is at or near your deductible, or when you already have recent claims and another one may risk non-renewal. The right call depends on your specific numbers and your insurer, which can differ between Kansas and Missouri.
How much does a home insurance claim raise your premium?
It varies, and an increase is not guaranteed. Water damage is one of the more rate-raising claim types: industry data from insure.com puts the average increase near 25 percent, with a single claim landing anywhere from about 10 to 40 percent depending on your state and history. Claims may stay on your CLUE report for up to 7 years (insurers usually look back 5). As an example, a 20 percent increase on an $1,800 premium held for 5 years would add about $1,800 in extra premium. Your actual figures depend on your carrier and state, so check with your insurer.
Will one claim get my policy cancelled?
One claim rarely leads to cancellation, but multiple claims in a short period can lead an insurer to non-renew your policy. Insurers track claims through the CLUE report, which follows the property for up to seven years. If you already have one or two recent claims, think carefully before filing a small one.
Does filing a claim below my deductible make sense?
No. If your repair cost is at or below your deductible, the claim pays you nothing because the deductible is subtracted from any payout. You would take on a recorded claim with no financial benefit. In that case, always pay out of pocket.
Sources
- insure.com, "Will my homeowners insurance go up if I file a claim?" - average premium increase per water damage claim (~25%) and the 10 to 40 percent range by state.
- insure.com, "Guide to the insurance claims history report (CLUE)" - how long claims stay on your CLUE report (up to 7 years; insurers usually look back 5).