8 Reasons You May Not Want to File a Small Insurance Claim

Filing small claims on home and auto insurance policies can potentially lead to several negative consequences, depending on the frequency and type of claims. Always call and check right away with your carrier/agent before making a decision. Not every carrier is going handle each unique situation the same way.  Here are the most common reasons why you may not want to file a small claim:

1. Increased Premiums

• Frequent Claims: Filing small or frequent claims, even for minor damages, can signal to the insurer that you're a higher risk. As a result, your insurance premiums may increase upon renewal.
• Claim History: Insurers often review your claim history when determining your premium. Too many claims, even if small, can lead to higher premiums.

2. Policy Cancellation or Non-Renewal

• Too Many Claims: Insurers may decide not to renew your policy if you have a history of filing small claims. In some cases, they could cancel your policy altogether if they consider you too high-risk.

3. Deductible vs. Claim Amount

• Small Payouts: If the amount of the claim is close to or just above your deductible, the payout may be minimal, making the claim less worthwhile. It may not make sense to file a claim for a small amount that won’t provide significant compensation after the deductible is applied.

4. Loss of Claims-Free Discounts

• Discount Impact: Many insurers offer discounts for not filing claims over a certain period. Filing a small claim may cause you to lose this discount.

5. Record on CLUE Report

• Impact on Future Policies: When you file a claim, it gets recorded in the Comprehensive Loss Underwriting Exchange (CLUE) database, which insurers use to assess risk. A history of claims can make it more difficult to switch insurers or get competitive rates.

6. Potential Coverage Limits

• Higher Deductibles: After filing multiple claims, some insurers might increase your deductible, which would make future claims less beneficial.
• Limitations on Coverage: Some insurers may also impose restrictions on what they will cover in the future, or limit your coverage options after several claims.

7. Claims for Minor Issues

• Future Liability Risk: If you file a small claim and later a larger issue arises related to the same problem, the insurance company may be less inclined to cover the subsequent claim, as they may consider it a continuation of the prior issue.

8. Potential Rate Increases for Auto Insurance

• At-Fault or Comprehensive Claims: For auto insurance, even minor claims, like a small fender-bender, can lead to increased premiums, especially if you're found at fault. Some insurers may forgive one at-fault accident, but multiple claims could cause a significant rate hike.

Alternatives to Filing Small Claims:

• Paying Out of Pocket: If the damage or repair cost is small and close to your deductible, it may be more cost-effective to pay out of pocket rather than filing a claim.
• Increase Your Deductible: Having a higher deductible can reduce your premiums, and it may encourage you to reserve claims for more significant incidents.

In summary, while insurance is meant to protect you financially, filing too many small claims can lead to higher costs in the long run, through increased premiums, loss of discounts, and other negative consequences. If you’re looking to understand your specific policy’s implications, it’s you should always check with your insurer directly, as they’ll have the most accurate and relevant information for your case.