When you purchase a home, one of the first things you do is acquire homeowners insurance. (Actually, this is usually done prior to closing so it is set in place the moment you are occupying your new home!) We’ve posted before about the basics of homeowners insurance, and what to expect when you look through your coverage options, but we wanted to move a step further and discuss when and how you might use your insurance.

Lets face it, something tragic could happen to your home. We can lessen the pain of that actually happening by having homeowners insurance, but if something were to happen, how do you know when to file a claim against your policy? Filing claims usually ends up in a higher premium (because the insurance company sees you as more risky). And filing a huge claim — or a lot of little claims — could lead to losing your coverage altogether! Note: almost all insurers use what is called a CLUE Report when researching potential new clients (and sometimes even renewals). This report shows all claims filed within the past 7 years.

The answer is simple: do the math. If it makes sense financially to file the claim, do it. If not, don’t.

Here are some things to keep in mind when weighing the financial facts:

• Get estimates right away to determine how much fixing the problem might cost you.
• Think about your deductible. If the damage is close to the amount of your deductible, it is best to just pay to fix it, and forget about filing a claim. If the damage is a lot higher than your deductible, filing a claim might be worth a second thought.
• Was someone injured in this particular situation? Many times, if someone gets hurt, the issue could escalate into a high-dollar claim. (Think lawyers and hospital bills.)
• Was water involved? Insurers do not like water damage because it usually leads to mold issues in the home.

So, what if you absolutely can’t afford to pay the bill for the damage, but don’t want to file a claim either? According to HouseLogic, “with a short-term loan from your bank or credit union, you’ll probably end up paying less in interest than you’d pay in additional annual premiums.”

Remember, any questions regarding your homeowners insurance should be brought to your insurance agent. If you need an insurance agent, contact us! We can point in the direction of some great local ones.