Money / Financial Planning
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Car insurance and homeowners’ insurance are mandatory expenses designed to protect others as much as they protect the policyholder. For instance, carrying liability insurance on your motor vehicle can result in the coverage of medical costs if another person is injured in a car accident while you’re driving — whether they are in your vehicle, on foot, or in another car. And homeowners insurance can help pay for property damage and also protect visitors, financially, in case they get injured in your home or yard.
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In some cases — such as liability claims — you don’t have a choice but to file a claim. For instance, if you damaged someone else’s motor vehicle in an accident, they have a choice to file a claim against your policy. If something happens, it’s important to have the right levels of coverage.
But what about making a claim for damage to your home or your vehicle? Is it worth it?
Studies show that, especially in the case of homeowners’ insurance, your policy premium rates can rise by as much as 20% per claim, Hippo.com reports. Whether it’s prudent to file a claim or not depends on a number of factors, including:
- Your deductible.
- The extent of the damage / cost of the claim.
- The type of claim.
- How many claims you’ve made in the past.
In some cases, repairing your home or vehicle won’t cost that much more than your deductible. If that’s the case, it’s easier and more affordable in the long run to forego insurance and just pay to get the damage repaired.
That’s why it’s important to try to have an emergency savings account — or a 0% interest credit card, at the very least — that you can use to cover unexpected expenses.
Filing multiple claims over a period of three to five years could even result in your insurance company dropping your policy, according to AARP.org. It’s highly likely you’ll pay even more for a new policy with a record of cancellation (or non-renewal) and a history of claims.
So, when is it worthwhile to file a claim?
Obviously, for catastrophic damage to your home or vehicle, you’ll want to file a claim. Insurance, after all, offers peace-of-mind that you won’t face financial hardship if something happens to your home or vehicle — damage that you can’t afford …….