When to File a Claim and When to Pay Out of Pocket

Accidents tend to happen all the time, whether that be a minor fender bender or a pipe burst in your basement. It’s important to know when to file an insurance claim and when to pay out of pocket. Knowing when to do which of these can save you lots of money in the long run. In this week’s blog we will break down the pros and cons of filing insurance claims, as well as offering guidelines to help you make the smartest financial situation.  

Why it Matters:  

Insurance is always there to protect you, but filing a claim sometimes isn’t always the best option. It’s possible the cost of filing a claim can outweigh the benefits. Always consider deductibles, premium hikes, and even policy cancellations.  

What to Consider: 

If repair costs are close to or below your deductible, paying out of pocket might be your best option financially.  

Certain claims, specifically at-fault or frequent ones, can cause your insurance premiums to rise for various years.  

Having multiple claims in a short period of time can label you as someone who is “high-risk”. Even small claims can add up quickly and affect your policy renewal and costs.  

There are a few specific damages that are always worth filing for such as total losses (car being totaled), major structural home damages, and liability incidents (somebody being injured on your property). Damages such as small scratches and minor leaks may be wiser to pay out of pocket.  

If someone else is involved, especially if there are injuries, you should most definitely file a claim to protect yourself financially and legally.  

When to File a Claim 

• The replacement cost is significantly higher than your deductible  

• Third-party involvement or injury is involved 

• You are not at fault and the other party's insurance will cover it 

• The damage is severe or has been destroyed 

• Your concerned about liability or legal issues 

When to Pay Out of Pocket 

• The repair cost is less than or slightly over your deductible 

• First time minor issue you can afford to fix 

• You’ve filed claims recently and want to avoid another hit  

• You're in control of whatever the situation may be and no third party included 

Important Tip 

Always make sure to document the damage and research estimates before deciding to file a claim. Even if you opt not to file a claim, having records and photos can always be helpful down the road.  

Filing insurance claims can defiantly be a lifeline but always take into account the smartest financial choice. By weighing the risks, costs, and long-term impacts you’ll be ready to protect yourself and your wallet. If you're not sure what the best solution is, always feel free to reach out to your insurance consultant. They will walk through all options without filing a formal claim. Check out our website for more information.