In many situations, the cost of your homeowners insurance can go up after you file a claim, but that’s not always the case. The frequency, severity, and type of claim all play a role in whether or not you see a rate hike and, if so, by how much.
Understanding how an insurance claim might impact your annual home insurance premium will help you make smart decisions about when to file a claim.
How much does your home insurance increase after a claim?
There’s no specific formula to estimate how much your premium may increase after a claim, since each insurance company has its own methods for how a given claim will impact rates. However, there are a few general factors that typically come into play, such as:
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The type of claim you file
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How frequently you file claims
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The number of claims filed for your property
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The party at fault for the claim-filing event
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State regulations
If you’re unsure about your claims history, you can request a free annual report from the LexisNexis Comprehensive Loss Underwriting Exchange (CLUE). It provides up to seven years’ worth of details about claims filed on home and auto insurance policies. However, while most major insurance companies participate in CLUE, some smaller carriers do not, so your CLUE report may not include 100% of your claims history if you’ve used a non-participating carrier in the past.
Why do insurance premiums go up after filing a claim?
Insurance companies see claims as an increased level of risk and a potential sign that more claims may be on the way. So when you file a claim, your insurer may raise your rates to protect itself against that perceived risk.
In most cases, rate increases occur at policy renewal, and not every insurance claim impacts your premium in the same way. Some may lead to more significant increases, while others may have little to no effect.
What factors influence home insurance rates the most after a claim is filed?
Every insurance provider has its own way of evaluating how much of an impact claims should have on premium rates. But, these five different variables are relatively common among insurers.
Type of claim and amount
Significant damage from events like fire or water is more likely to result in higher-value claims and higher increases. The same can be true of personal liability claims; smaller claims may not cause as dramatic an increase.
Fault
A preventable incident (like a fire that starts because you left the stove on) may be covered, but it’s more likely to result in a bigger increase when compared to an unavoidable event. Note that it’s unlikely your insurer will cover a claim for neglect or intentional damage.
Claims frequency and history
Filing multiple claims in a short period can be a major red flag for insurers, triggering a steep rate increase. Worse? You may end up getting a nonrenewal notice.
Similarly, if you have a long history of going claims-free, you may not see as high of an increase as someone who has had a more active, recent claims history.
Over time, insurance companies may also track the number of claims filed in your geographic area. Premiums are typically higher in disaster-prone locations, and your insurer could raise home insurance rates across the board if it notices an upswing in catastrophic claims in your state.
State regulations
Some states have regulations that limit when and how much an insurer can increase rates based on the type of claim. In some states, like Florida, insurers may face extra hurdles when raising rates after catastrophic claims, like those for hurricane damage. In Texas, your insurer can’t raise your rates after appliance-related water damage claims as long as you meet specific requirements.
What types of claims have the biggest impact on your homeowners insurance premium?
The most significant increases in home insurance are usually caused by claims that are likely to happen again. For example, theft claims tend to recur, as do injury claims related to attractive nuisances like swimming pools and trampolines.
Claims that could have been avoided or are your fault, such as accidental fires, can also cause larger rate increases than other claims.
Still, post-claim premium increases will depend on several factors, including your insurer, the laws in your state, and the specific circumstances around the loss.
When should you avoid filing a home insurance claim?
Deciding whether or not to file a claim? Here are a few scenarios where you might be better off paying out of pocket for repairs.
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The repair cost is less than, or close to, your deductible.
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You’ve filed a claim within the past three years and have the means to cover expenses on your own.
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The loss is caused by normal wear and tear, or by a peril excluded from your policy.
Consider your unique housing and financial situation to decide when filing a claim is worth it and when you may be better off handling the repairs on your own.
How long does a claim affect home insurance rates?
Claims stay on your CLUE report for up to seven years, but your insurer might not factor in claims for that same timeframe. They might only look at the last three years of your claims history.
Are there situations where insurers can’t increase your rate after a claim?
The laws in your state may prohibit insurers from considering certain types of claims when calculating your premium. For example, some states prohibit insurers from raising rates following a natural disaster claim, or when a claim was filed but there was no reimbursement.
If you’re concerned about a rate increase, or about how a particular claim may affect your rates, contact your insurance company.
How to keep your insurance rates from rising
The best thing you can do to avoid rate increases is to avoid filing claims, and a good way to do that is to make your home safe. You can lower damage risks by:
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Staying on top of home maintenance
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Keeping up with home repairs
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Hardening your home against the most common weather risks in your area
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Installing safety devices like burglar alarms and security systems
What to do after a rate increase
If your home insurance premium has already increased, the following strategies can help you find more affordable insurance coverage.
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Shop around for coverage: You don’t have to stay with the same insurer. Get quotes from at least three insurers to see if another insurer may offer the same or similar coverage at a more affordable rate.
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Choose a higher deductible: Typically, premiums are lower when you choose a higher deductible. Just remember your out-of-pocket expenses will be higher when you do need to file a claim.
It’s not unusual to see premiums increase over time, but taking proactive steps to avoid unnecessary claims can keep your insurance costs as low as possible.