By Amy DeYoung
Updated Dec 15, 2022
Home insurance policies can give a homeowner peace of mind that their home is covered should a sudden, unexpected peril happen. Examples of covered perils may include water damage from burst pipes, natural disaster damage, vandalism to personal property, and weather-related claims. However, you may be nervous about filing a claim if you’re concerned about your insurance provider raising your homeowners insurance premium.
Below, we discuss if this is a valid concern, how much your home insurance may increase after filing a claim, how long the price spike may last, and much more.
A home insurance claim can cause your home insurance premium to increase temporarily. However, there are exceptions to this and situations where home insurance companies cannot increase your premium after you file a claim.
According to a survey by Consumer Reports, 50% of survey participants who filed a claim with their provider had an increase in premiums.
However, only 12% had increases of $200 or more yearly, which shows that, in most cases, making a claim will still save you more money in the long run.
Most home insurance policies increase a nominal amount of less than $200 after a claim. If you’re filing small claims infrequently, your insurer will unlikely decline to renew your policy or enact rate increases.
Factors that may affect how much your insurance premium increases after a claim include:
Your home insurance rate may also increase based on how often home insurance claims are made in your area by the public. For example, suppose a natural disaster, like a tornado or hurricane, devastates your area. In that case, home insurance providers that insure people in this area may increase policyholders’ premiums due to the higher risk of insuring where you live. If you live in an area with a high crime or theft rate, your insurance provider will factor this into your premium.
So, why would a home insurance provider increase your insurance costs after you file a claim? After all, a home insurance policy protects your home and personal belongings after a catastrophe.
While it may seem unfair, the higher premiums are a way that the insurance company protects itself and ensures that it can reimburse you for covered claims. If your company believes you’re likely to file more insurance claims in the future, it may increase your premium to ensure it can cover these claims.
Specific claims, such as water damage, dog bite, and theft claims, are more likely to get you flagged as a higher-risk policyholder because the homeowner can prevent many of these claims. Unlike a tornado passing through your home, an insurance provider may view dog bites or attacks as avoidable. This would also be true for theft and water damage to a certain degree if the claims could have been avoided with a better security system or home maintenance to avoid a burst pipe.
In short, homeowners insurance premiums are calculated based on how likely you are to file a claim. If a company believes you’re at a high risk of natural disasters, or other claims like dog bites, they may increase your premium accordingly.
Most homeowners insurance premium increases will stay at a higher rate for about five years, as this is how long the typical claim stays on your record. However, this number will vary based on the company. Some companies only keep records for up to three years, while others may consider claims as far back as seven years ago.
After enough time has passed, your home insurance rate should go down. However, it may return to a different rate than it was previously based on inflation and other pricing factors.
If your home insurance premium hasn’t changed at all and you’ve been claim-free for years, speak to an insurance agent about the claim history period for your provider and any discounts you may be eligible for as a policyholder. You can adjust your homeowners insurance policy by opting for a higher deductible to save you money on your premium if you believe you’re unlikely to make many property claims.
Insurance providers are regulated at a state level and are limited by consumer protection laws, which will vary from state to state. As a result, there are some situations where an insurance provider cannot legally raise your premium.
Examples where insurance companies may be prohibited from raising premiums include:
Please keep in mind that consumer protection laws vary by state. For more information, contact or research your state’s department of insurance to learn more about home insurance regulations. You can also ask your insurance provider about what you’re legally exempt from regarding rate changes.
In some cases, it may not be worth filing an insurance claim if it’s for a small amount of money or the damage costs less than the deductible. Therefore, you can consider paying for that property damage out of pocket to avoid adding to your claims history.
In addition, if you’re still experiencing a significant price hike after filing one small claim or years have passed since your previous claim, consider shopping around for a new homeowners insurance company. Gather multiple insurance quotes for your area, and don’t be shy about asking for discounts, especially if you have a clean claims history.
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