SALEM, Ore. (CNN/Money) – A couple of months ago, my husband drove into our garage -
with an expensive bicycle still on the roof of the car. The house and the car were undamaged, but the bike was beyond repair.
Like many insurance customers, I had opted for a policy with a high deductible of $1,000 because I knew it wouldn't pay to file small claims anyway. You risk paying higher premiums, or worse, getting dropped completely.
"Each company has different procedures, but generally if you file a lot of small claims that can be problematic," said Jeanne Salvatore, vice president of consumer affairs for Insurance Information Institute. "Statistically, most people only file a claim every 8 to 10 years, so if you're filing more than that you stand out."
The statistics were already stacked against me. Three years ago I filed a claim in New York after my mountain bike was stolen. I'm still paying for that claim via higher premiums on my homeowners insurance in Oregon.
Still, I decided to take what was left of my bike to a local bike shop to see what the mangled steel and carbon was worth.
What's it worth to you?
Insurance companies tell customers to inform them of a loss as soon as possible, but that window of time is usually about 30 days, according to John Bailey, an independent agent with George B. Bailey Agency in New York and former president of the Professional Insurance Agents of New York.
Though you want to act quickly, it's usually a good idea to find out what the value of the damage is before you talk to the insurance company or your agent.
"We've had instances where people are penalized for inquiring about a claim, even if they don't make a claim," said Bailey, who recommends not filing a claim if it's worth less than $1,000 over your deductible.
But, if the claim involves another party and there is potential for a lawsuit, it's wise to let your insurance company know right away.
"You might think your dog's bite or a fender bender was minor but that could lead to something major," said Bailey. You want your insurer on your side in a lawsuit, even if it means paying higher premiums down the road.
If the loss is related to a maintenance issue, such as a chronic leak or a few missing shingles, you probably don't want to file that claim, said Mari McQueen, senior editor for Consumer Reports.
A final consideration is your recent history of claims. "What gets people into trouble are small claims several times a year," said Salvatore. "It indicates there's a pattern there."
Who can you trust?
It would cost $3,000 to $4,000 to replace my entire bike, I was told by my bike dealer. "But you still might not want to claim this," he warned, not knowing that I write about personal finance for a living. "Your insurance company might drop you."
I called my insurance agent for a second opinion.
Before you confide in your agent, said Bailey, find out whether they are obligated report all inquiries to the insurance company.
"Each circumstance is going to be different," he said, explaining that it depends on the company's policy, the nature of the claim and the agent's allegiance with the insurer. Independent agents working for several companies, for example, may be in a better position to give advice than captive agents working with one company.
My agent told me she would have to report the inquiry if water damage or liability were a factor but, I gathered, it was safe to give her the details of my run in with the garage.
Would this claim raise my premiums? I asked.
"That depends," she said. On the one hand, my last bike claim did raise my premium about $50 a year, she said, but the formula for calculating a premium is based on so many factors that there is no way to know for sure.
Will I be paid the value of the entire bike or just the damaged parts? I asked.
"I'm not an adjuster," she said. "There's really no way to know until you file the claim."
With so many uncertainties, I decided to take my bike dealer's advice and not file the claim.
In practice, it was probably the right move. In principle, maybe not.
"There are a lot of people who will not make a claim even if the loss isn't their fault and is well over the deductible," said Mark Savage, a senior attorney with Consumers Union. "What's disturbing is that you're paying a premium that is calculated to cover the risk that you actually use the policy."