By Lana Clements

Your home insurance is a financial safety net for your home and belongings, so you're compensated for the cost when something unforeseen threatens to put you out of pocket.  

But did you know that most insurers operate on a three strikes and you're out policy?

If you make three claims or more in a three-year period, no matter how small the amount, you will instantly become undesirable to insurers. And it may not just be your current home insurance firm that is put off covering you - other companies will ask for your claim record and think twice about taking you on too.

You may simply be refused cover or, if you are offered cover, you may find you have to pay a very large premium in order to get it. It's a nasty catch for which people can unwittingly end up paying through the nose.

Therefore, if you've already claimed twice over the space of three years and are thinking about whether to claim for something relatively small, it may be better not to.

Often you can't avoid making a claim, especially if it's for something major, but sometimes it will leave you further out of pocket in the long-run than if you had simply absorbed the short-term cost yourself.

In order to help decide when you should or rather shouldn't make a claim, there are three cost factors to take into account:

1. The cost of damage you are claiming for

After a large-scale loss, such as a flood or a fire, claiming on your insurance is a no-brainer. However, contents insurance can cover all manner of loss right down to frozen food ruined by a power cut to losing your keys and getting the locks replaced.

You pay for your insurance premiums so there's no reason you shouldn't claim for something small. But before you do so, ensure you take into account the two factors below and weigh up whether it makes more sense to simply pay for the cost of damage yourself.

2. The excess

A large excess will keep the cost of a premium down as insurers know you have to think a little harder before making a claim.

So if you took the risk of a large excess and are claiming for something relatively small, the amount you'll have to pay upfront may mean it's not be worth making the claim - especially when taking into account the final factor...

3. Premium uplift

Obviously you won't know until you renew your home insurance how much you have been penalised for making a claim, so this is the most difficult cost to measure.

It will also depend on the type of claim you are looking to make. But generally you should expect to see a premium rise of anywhere up to a couple of hundred pounds for an accidental damage claim.

Making a decision

When deciding whether to make a claim, try to work out the cost of your excess and expected premium rise, versus the cost of damage. If the cost of damage is less, and you can afford to take the cost on the chin, it's a better option.  

If you do make a claim and find that your premium has risen steeply at renewal as a result, be sure to shop around for a better quote with other home insurance companies, although you still have to disclose your previous claims.

Insurance companies take your claims history into account not just for the past year, but usually the past three, or even five, years, so you should bear this in mind too.