For many, this question is fairly easy to answer. Because water damage restoration can be expensive, many prefer to file an insurance claim rather than dip into their savings to get their basement flooding cleaned up. For some, however, there are situations where paying out of pocket may make more sense.
If you can comfortably pay for the minor damages, it is best to do so. For example, if you have a minor clumsy accident and damage your fence, you may choose to handle the costs independently. Filing an insurance claim may take longer and may impact future premiums.
The more you ask your insurance company to pay for repair costs, the higher your future premiums. Save yourself the ache of having to pay more in the future and take care of the expense from your bank account. The limit to which you can pay out of your pocket depends on your insurance package.
Don’t rush to ask the insurance company to pay for the repairs before knowing how much repairs will cost. In the cases of minor problems, it would be better to pay out of your pocket than wait for the insurance process. If you are not sure how much it would cost you, you can call your insurance company and ask them.
A good example is when the deductible costs $500, and the repairs or replacement cost the same amount or less. It makes no sense to file a claim for $500 if you pay the same amount for your deductible.
Most insurers offer discounts for people who do not have an insurance claim for about three to five years. The discount varies from insurer to insurer but mostly ranges between $200 to $500. Saving this amount can serve as extra cash for other bills. When you file a claim, you will have to wait for the period to expire for you to get into their claim-free record.
In the cases where you file several claims, your insurer may increase your premium rates since the risk is higher. Whenever you file a claim, especially for something you initiated, your claim record goes to the Comprehensive Loss Underwriting Exchange (CLUE) database. Appearing several times on this list may cause you to have a hard time getting affordable insurance coverage.
A great idea is to create an emergency fund. Even small amounts of money set aside each week or month can add up quickly – and can then be used for any unexpected repairs. This emergency fund is also the money that can save you years of higher premiums.