Telling the difference between home improvements and claims

For some homeowners, the temptation to report a deteriorating home feature as an incidental claim might be strong. After all, homeowners' insurance is designed to cover the costs of damages beyond your control, though it could be that you failed to take adequate preventative measures. Telling the difference might present some gray areas, but use your best judgment to account for due diligence. In Market Watch, Jennifer Waters cautions homeowners about misrepresenting household updates as claims.

"Don't submit claims for what is really a home-maintenance project. If the fence is rotting away and you know that one big windstorm will blow it over, budget the household finances for a new fence first," she says. "There's a plus to this too: better maintained homes get better premiums."

The risk of filing a claim for something like a moldy, dilapidated fence is that a provider might increase your rates because a new incident is on the books. Companies reward homeowners with clean records, and so using strong judgment when reporting: Is it out of necessity, or might the claim border on frivolous? For some small projects, it could even be that you're better off paying for damages yourself to preserve a low premium, than to seek compensation that could raise your rates. 

Like many areas of personal finance, deciding when to file and when not to file a claim is a balancing act. A homeowner has to weigh outcomes, and examine the potential consequences of making a claim that's better off handled out of pocket. This is why many insurance experts encourage policyholders to build up an emergency fund for household expenses, in case damage is too insignificant, ambiguous or due to a lapse in maintenance.