Should You File That Small Claim or Pay Out of Pocket?

So… life happened and you find yourself needing to decide whether you should file a small insurance claim or pay for the damages out of pocket. Depending on the circumstances, this can be a difficult decision to make. Especially because filing a claim can sometimes impact the cost of your insurance.

While we always hope that they don’t happen, incidents and accidents are never far around the corner, and being protected through insurance can make all the difference. Insurance covers you financially and protects your dependents when the unexpected occurs.

Trusted local insurance agencies like Bosworth & Associates in Tyler, Texas, know that, in the event an incident does occur, it can be confusing to know whether it’s in your best financial interests both immediately and in the future to file a small claim.

Is It Always Best to File a Claim?

The fact is, while your insurance is there to protect you and your family, there are times when it’s a better option to pay out of pocket.

When you file a claim, it impacts different parts of your insurance such as your insurance rates/premiums, your deductible, and other parts of your insurance policy.

When it comes to whether to file an insurance claim or pay out of pocket, there are multiple variables to consider.

Will you be filing a claim for your health insurance? Car insurance? Homeowner’s policy? Renter’s insurance?

Policies and their stipulations, restrictions, and what is covered vary, so it’s important to have an understanding of your policy before you decide to make a small claim.

Key Questions to Consider Before Filing

How often have you made claims in the past?

Your claim history can impact the cost of your insurance policy. If you make frequent claims, it might set off a red flag and cause you to be deemed higher risk to insure, which can make your rates go up. If the risk of a premium increase is more than the cost of paying for the incident yourself, you can weigh the short- and long-term cost benefits.

Have you been found “at fault” in an incident?

Have you been found at fault more than once? If so, you could be looking at an increase in your premium, as you’ve now become a higher risk to insure.

What kind of damage occurred?

The nature of the damage in the incident plays a big role in whether you should file a claim or pay for the damages yourself. For example, if your roof was torn apart in the latest East Texas tornado or your car was totaled in an accident, homeowner’s insurance or truck insurance are there to protect you. However, if you lose a few shingles or get into a minor fender-bender, you have the option to handle the costs yourself.

What is your deductible amount vs. what it costs to cover the damage?

Once you determine what it will cost you to pay for the damage, it’s a good idea to compare that amount to your deductible so you can make a decision as to whether paying out of pocket or filing a claim is more cost effective.

Are you the only one involved or is there a third party involved in the incident?

Who is involved makes a big difference when it comes to the legalities behind filing a claim. If a third party is part of the incident, you need to consider legal and financial protections for yourself and your dependents. This is especially true if there are other variables present such as a lawsuit or injuries.

Do you have discounts applied to your policy that help lower your premium?

In some cases, insurers offer discounts for various “good behaviors” such as not filing a claim for a certain length of time or in the example of car insurance, not having any dings on your driving record.

What are the potential long-term impacts to your insurance coverage if you file multiple small claims?

If you find yourself in the position where you are deciding whether to file another small claim, it’s a good idea to look at the cost-benefit ratio when it comes to both coverage limitations and higher deductibles that are sometimes applied to policies that have filed multiple claims. Before you file your claim it’s important to know whether you will end up paying higher deductibles and/or experience coverage limitations.

When it comes down to whether you should file a small claim or pay out of pocket, it’s important to have all your insurance information and the details of your policy so that you can make an informed decision that won’t negatively impact your premium rates in the future.

Contact your local insurance agency to find out more.