I made a mistake. The reprint cost is $3,000. My insurance deductible is $1,000.
The math seems simple: File the claim, get $2,000, and save money.
My Analysis: That is a terrible idea. Here is why you should probably pay the $3,000 out of pocket.
Key Takeaways
- The “Loss Run” Report: Every claim you file goes on a permanent record called a CLUE report or Loss Run.
- Premium Hikes: A claim can increase your premiums by 20-50% for 3-5 years. $500/year increase x 5 years = $2,500 cost.
- Non-Renewal Risk: If you have 2 small claims in 3 years, many carriers will drop you entirely. Getting “high-risk” insurance later costs triple.
- The “Notice Only” Loophole: You can report the incident to lock in coverage without demanding a payout.
The “Why”: The Economics of Insurance
Insurance is designed for Catastrophic Loss (the $50,000 lawsuit), not Operational Expense (the
2,000
Deductible: –
1,000(Paidbyyou)PremiumHike:−1,000(Paidbyyou)PremiumHike:−
2,500 (Over 5 years)
Net Result: You lost $500 and now have a “dirty” record.
The Investigation: I Talked to Underwriters
I asked 3 underwriters: “When should I file?”
1. The Threshold Rule
- Consensus: Do not file a claim unless the damages are 3x your deductible.
- If Deductible is
1,000−>Don′tfileunlesslossis>1,000−>Don′tfileunlesslossis>3,000. - If Deductible is
2,500−>Don′tfileunlesslossis>2,500−>Don′tfileunlesslossis>7,500.
2. The “Notice of Circumstance”
- The Trick: You can file a “Notice of Circumstance.” This tells the insurer, “Hey, this happened, I’m handling it, but I want you to know in case it blows up later.”
- This protects your right to claim later if the client suddenly sues for $50k, but it doesn’t count as a “Paid Loss” on your record (usually).
[IMAGE: Graph showing “Cost of Claim” vs “Cost of Premium Increase” over 5 years]
Comparison Table: To File or Not to File?
| Loss Amount | Deductible | Decision | Reason |
| $2,000 | $1,000 | Don’t File | Premium hike > Payout |
| $5,000 | $1,000 | Maybe | Borderline |
| $20,000 | $1,000 | FILE | Catastrophic Protection |
| $50,000 | $5,000 | FILE | Essential |
Step-by-Step Action Plan
- Get the Exact Number: Don’t guess. Get the invoice for the damages.
- Check Your Deductible: Look at the Declarations Page. Is it $500, $1,000, or $5,000?
- Calculate the 3x Rule: Is the loss 3x the deductible?
- If No: Pay it yourself. Get the client to sign a “Release of Liability” in exchange for the payment (so they can’t sue you for more later).
- If Yes: Call the carrier.
FAQ
Can I pay the client and get reimbursed?
No. Most policies forbid “Voluntary Payments.” If you pay it, the money is gone.
Does a “Notice Only” raise my rates?
Sometimes, but much less than a “Paid Claim.” It shows you are responsible.
Can I lower my deductible?
Yes, but your monthly premium will go up. It’s usually better to have a higher deductible ($2,500) and lower monthly costs, keeping the insurance for big disasters only.