Filing a small insurance claim now can cost much more money later

Some homeowners who ask their insurer for a relatively small reimbursement for a loss today can face much higher annual premiums and even cancellation of their policy in the future.

Q. A pipe under our bathroom sink broke, sending water all over the linoleum tiles on the floor and ruining several of them. It cost $900 to fix the pipe and replace the damaged flooring. Can we file a claim with our insurer for the work and materials?

A. Yes, you can file a claim for the repairs — but it might not be worth it.

For starters, the $900 in damage that you suffered is a relatively small amount. If you have a standard $500 deductible, the most you could hope to recover from your insurer would be $400. That’s really not worth the risk of seeing your future premiums rise, perhaps by hundreds of dollars a year, because you would have a fresh claim on your record.

More importantly, there’s a chance that filing a claim might even result in the insurer canceling your policy altogether, especially if you have filed one or more other claims in the past two or three years. That’s because many insurers figure that if you have made more than a claim or two in the recent past, no matter how small, you’re more likely to file again in the future.

It’s also worth noting that most insurers are particularly wary of customers who file claims for water-related damage. They’ll sometimes pay for the repairs but then cancel the policy in order to reduce the chance of getting hit with an even costlier mold related claim later.

Because it’s becoming increasingly unwise to file small claims, some insurers say that homeowners should consider raising their deductibles in order to trim their annual premiums.

Experts have said that owners who have a typical $500 deductible but raise it to $1,000 or $2,500 can easily slash more that 30 percent off their bill, which can save them hundreds of dollars a year, while still providing adequate coverage if they later suffer a major loss.

The nation’s property and casualty insurers posted a combined $60 billion in profit last year, the Insurance Information Institute recently reported, nearly double the amount in catastrophe-plagued 2017.

Q. I recently signed up for a program that lets my mortgage lender automatically deduct my loan payment from my checking account on the first of each month, which saves me time writing a personal check and ensures that I won’t get hit with a penalty as long as I have enough money in the bank. But now, I have started to wonder: Is the fact that my future monthly payments will automatically be debited from the account hurt my credit score because they won’t be paid by a traditional paper check?

A. No, your new payment arrangement with the bank won’t have any impact on your credit score. Lenders and even credit bureaus themselves don’t care how you pay your mortgage or other bills, as long as those payments are made in a timely manner.

Your report won’t even note how those bills are paid, be it through automatic withdrawal, online, with a personal check or in cold cash.

Q. About two weeks ago, we accepted an offer from a buyer who wants to purchase our home. Now we would like to remove the “For Sale” sign from our front yard because it encourages some rude people to simply knock on our door unannounced and ask for a tour, but our real estate agent says we should leave the sign up because it might generate additional offers. What do you think?

A. I would follow your sales agent’s advice to leave the sign up, at least for another couple of weeks.

Real estate deals today can fall apart for any number of reasons, from a sudden jump in mortgage rates that renders a borrower unable to get a loan to a previously undetected structural problem that makes the buyer suddenly get cold feet.

The for-sale sign that still stands in your yard could indeed generate one or two “backup” offers from other potential buyers, which could come in handy if the sale that you’re currently planning unexpectedly disintegrates.

I agree that it’s boorish for people to show up on your doorstep and expect you to provide an unplanned walk-through of your home. Oftentimes, those people are other real estate agents, investors looking for a bargain-basement deal or even thieves hoping to snatch your valuables.

An easy solution to your problem may be to ask your agent to put a small “sale pending” or “do not disturb occupants” sign on top of the larger for-sale sign in your yard.

The small signs, known as “riders,” will usually discourage pesky lookie-loos from bothering a seller but won’t scare off serious potential buyers from contacting the seller’s agent to make a backup offer.