Your Guide to Home Insurance Rates
Having a homeowners insurance policy offers peace of mind. After all, it can help pay for the damages and losses in the worst of disasters, from a fire or severe storm, to a burglary or injury on your property. But does filing a claim mean your homeowners insurance premium will see an unexpected increase?
Stay with us as we break down the most common risks to help you determine if your policy will see a premium increase—and how you can prevent it from happening.
Do Homeowners Insurance Rates Increase After a Claim?
Although you shouldn’t ever hesitate to use your homeowners insurance in the event of an emergency, such as a burglary or damage from a fire, it’s important to understand that filing a homeowners insurance claim can lead to a hike in your monthly premiums. Why?
You purchase homeowners insurance to cover the losses when disaster strikes. And by insuring your home, an insurance company assumes financial risk on your behalf. Therefore, when you file a claim, your provider must meet its financial obligation by paying what it legally owes.
As a result, when you file a claim, your provider may consider you a higher risk and more likely to file more claims in the future. When that happens, the insurance company may increase your insurance premium on a temporary basis. The amount your premium will increase after a claim depends on a variety of factors, including:
- Your personal claims history: If you have a history of filing claims at previous homes or places you lived, an insurer may see you as a greater risk of filing more claims and increase your rate as a result.
- Frequency of claims in your area: If a major storm causes extensive damage in your city, you may see your insurance rate increase more substantially than it would if you had filed a single property damage claim.
- Type of claim: Not all claims are considered equal by insurance companies. In fact, some events are viewed as likely to happen more than once. This makes them more of a financial risk, which can increase premiums and make it difficult to get coverage going forward. The claims that are most likely to result in a rate increase or nonrenewal include:
- Water damage or mold claims
- Theft claims
- Fire claims
- Liability or dog bite claims
If you’re filing a claim related to any of these hazards, you’ll want to pay special attention to your policy deductible. The average homeowners insurance policy carries a deductible of anywhere from $500 to $2,000. If you file a homeowners insurance claim for any of the most risky hazards listed above, you should pay careful attention to your policy deductible. After all, it may not be worth it to file a claim that isn’t even twice your deductible amount.
For example, if you experienced a home theft that resulted in $3,000 worth of losses and your plan carries a $1,000 deductible, that claim will benefit you financially. Your premium may see a slight spike depending on your loss history, but you’ll still see a $2,000 reimbursement to help with replacing what was stolen.
On the other hand, a $2,000 deductible in that same situation may not be worth the risk. Your insurer would still cover $1,000, but that could be a small enough amount to try and cover your losses on your own and prevent a rate increase. However, this choice will vary for everyone, since it will depend on your financial situation and the importance of the stolen property.
How Much Will Your Homeowners Insurance Premium Increase?
As mentioned above, whether or not your insurance premiums increase after a claim largely depends on the type of claim and amount, as well your claims history.
However, according to a study commissioned by InsuranceQuotes, US families who file a single homeowners insurance claim can expect their annual premium to increase as much as 21 percent. The study was based on a hypothetical two-story, single family home covered for $144,000 with a $500 deductible, and revealed how much annual rates can increase for claims including fire, hail, liability, medical, theft, vandalism, water (non-weather related), weather (except for hail and wind) and wind.
However, the percentage amount varies significantly depending on where you live. For example, Minnesota and Connecticut both saw the highest increases, at 21%, while New York and Florida saw the lowest increases, at only 1 and 2 percent. The percentage hike in premium rates is largely based on state regulation.
For example, Texas insurance law prohibits insurers from increasing premiums on homeowners for filing first-time claims.Texas insurance law prohibits insurers from raising rates on homeowners who are filing a first-time claim. As a result, filing a single claim in Texas won’t result in any premium increase.
How Long Do Home Insurance Claims Stay on Your Record?
Depending on the insurance provider, homeowners insurance claims may remain on your record anywhere between three and seven years. Most companies can access your claims history through national databases that track claims up to a certain number of years.
The Comprehensive Loss Underwriting Exchange (CLUE) is the most well-known customer claims record database. Claims will typically stay on your CLUE report for up to five years, and insurance companies may use this information to increase your rates or deny you coverage. It also includes information about claims of your property before you bought your home, usually up to five years.
How to Avoid an Increase in Your Homeowners Insurance Rates
Here are some steps you can take to prevent your homeowners insurance company from raising your premiums after a claim:
- Only file catastrophe claims: Be careful about submitting insurance claims. If your home sustained minor damage and it’s something you can pay for out of pocket, that may be your best course of action. Save your home insurance claims for weather catastrophes or significant property loss.
- Check your CLUE report: Make sure to request a copy of your CLUE report to get both your personal 5-year loss history and the loss history of the property from previous owners. This is especially true if you’re planning to purchase a new home. If a potential home has a history of mold growth or water damage, you may want to avoid living there because of the potential for spikes in your insurance.
- Consider your deductible: Always try and avoid filing claims that are less than twice your insurance deductible.
See How Much You Can Save on Homeowners Insurance
Now that you understand what causes these increases, it’s time to find a provider that will give you the best rates possible. And we’re here to make the hunt for home insurance coverage easier than ever with our fast and affordable online insurance quotes. Get your free quote today and enjoy the peace of mind that your home and family are prepared and protected.
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Autumn Cafiero Giusti is a licensed life and health insurance broker and award-winning journalist with more than 20 years of experience. She writes extensively about flood, Medicare, home, and life insurance for publications like U.S. News and CBS News.
