Does homeowners insurance go up after a claim?
Fact-checked with HomeInsurance.com
Moving into a new home without first purchasing a homeowners policy would be unthinkable. After all, you need the protection home insurance provides when disaster strikes. Home insurance can help pay to rebuild your home after a fire, replace stolen personal property or pay medical bills if a guest takes a tumble while visiting you. But how much does insurance go up if you make a claim?
Filing a claim can lead to a premium increase depending on several factors. Your home’s claim history can impact your premium and if you file numerous claims you can expect your insurer to hike your rate.
Certain types of perils cause the highest percentage of losses and consequently lead to the highest premium increases. If you’re unsure how filing a homeowners claim might affect your insurance rate, follow along and we’ll show you how to avoid a costly insurance premium increase.
Why do claims increase home insurance premiums?
By insuring your home, an insurance company assumes financial risk. When you file a claim for a covered loss, the insurer must meet its financial obligation by paying what it legally owes.
According to the Insurance Information Institute, between 2014 and 2018, U.S. insurers paid nearly $13.7 billion, just in property damage claims. You purchase homeowners insurance to cover losses when disaster strikes. But, when you file a claim, the provider may consider you a higher risk and more likely to file more claims in the future. When that happens, the carrier may increase your insurance premium.
Claims by Type
- In 2018, liability claims accounted for less than 2% of homeowners claims.
- Water damage and freezing losses accounted for nearly 24% of home insurance claims in 2018.
- In 2018, wind and hail damage accounted for 34.4% of property damage claims.
- Fire and lightning damage accounted for nearly 33% of homeowners claims in 2018.
- Between 2014 and 2018, 5.6% of home insurance policyholders filed a claim.
- In 2017, homeowners insurance rates increased by an average of 1.6%
Which claims are more likely to result in a rate increase?
- Dog bites
- Water damage
According to the Insurance Information Institute (III), fire claims are the most severe in terms of loss amount, which is reflected in the highest premium increases. Fire and lightning claims accounted for an average of nearly $80,000 in losses between 2014 – 2018.
Liability claims, such as medical expenses and legal fees following an accident in your home, come in second based on overall average losses. Oftentimes, dog bite liability claims are very costly for insurance companies, because they can result in medical expenses and legal costs, sometimes including a court award. With fire and liability or dog bite claims, you can expect to see an increase in your premium if filing one of these types of claims.
How long does a claim affect your homeowners insurance?
Typically, claims filed in the last three years have the most impact on your home insurance rate. Catastrophic losses such as a complete rebuild following a fire, as well as liability losses, can have a greater impact on your rate. Filing two claims in a five-year period will likely lead to a rate increase and filing a third claim could prompt the insurer to terminate your policy, making it difficult for you to find another provider.
Your claims-filing history is very important, but your home also has an insurance history. Insurance companies contribute claims data to the Comprehensive Loss Underwriting Exchange database, administered by LexisNexis. When you apply for a home insurance policy, the insurer will access the database to find out if any owner has filed an insurance claim on the property.
If a previous owner filed several claims on the property, the insurer may determine that you likely will file additional claims in the future and charge you a higher rate. Only the homeowner and insurance companies can request a CLUE report, so when you shop for a home, ask the seller to provide the report before you enter into a contract.
How to keep your homeowners insurance rates low
If you’re looking for a new home, shop around to find the lowest rate. And, if you already own a home and want to reduce your premium, the following tips may help you achieve a lower rate:
Increase your deductible
A low deductible – say $500 or $1,000 – can seem like a good way to save on your homeowners insurance. After all, the lower the deductible, the less you’ll have to pay out of pocket if a covered loss occurs. But increasing your deductible can be a great way to lower your premiums if you can absorb the higher deductible in the event of a loss. If you have enough savings to cover minor damages, raising your deductible to $2,500 or $5,000 can significantly decrease your monthly insurance payment.
Pay your bills on time
Depending on the state, insurance companies can sometimes use your credit rating as a factor when determining your premium. Policyholders with poor credit often pay more for home insurance as they pose a greater risk to the insurer. Although poor credit has a higher impact on auto insurance, you may pay a higher homeowners rate if you have a history of making late payments on bills such as credit cards (factors associated with a poorer credit score).
Bundle home and car policies
When you purchase auto and home insurance from the same provider, you can often save money on both policies. For example, Allstate offers savings up to 25% when you bundle car and home insurance and Amica offers up to a 30% bundling discount. According to State Farm, their policyholders save an average of $854 per year when they purchase car and homeowners insurance.
Install safety and security devices
Major carriers, including Farmers, Travelers and Progressive, extend discounts for homes equipped with safety devices such as fire alarms, smoke detectors and sprinkler systems. You can also earn a discount for installing a security system, and an increasing number of insurers offer reduced rates for homes equipped with smart home devices.
Fortify your home
When you strengthen your home against the elements, you could earn a discount. For instance, State Farm extends discounts on homes equipped with impact-resistant roofs and Farm Bureau offers a discount just for replacing your old roof. You can also save money on home insurance when you install storm windows or storm shutters.
Inquire about other discounts
Most insurance companies provide additional alternative options to reduce your premium, which can net substantial savings. For example, American Family offers discounts when you purchase a newly constructed home and when you replace electrical, heating and plumbing systems in older homes. Some insurers also offer discounts when you pay your premium in full, set up automatic payments or opt for paperless billing.
- Filing a claim can lead to a premium increase depending on the severity and frequency of the claims for that home or the insured.
- Your home’s claims history can also impact your insurance rate.
- Losses caused by fire, hail, lightning and wind often lead to the highest rate increases.
- Insurers offer many discount options to help you reduce your premium.
You carry home insurance to help pay for losses when catastrophes occur but filing a claim can have an impact on your premium. If you can afford to pay out of pocket for minor losses, you can avoid a potentially costly increase. The severity of claim and frequency of claim history for both the home and insured play a role in potential rate increases.
When searching for a new home, it’s best to shop for insurance first, to see the types of discounts insurers offer. Providers extend all types of discounts to help lower your rate. From discounts for new construction, to savings for renovating an older home’s major systems or installing safety and security devices, there are many ways to keep your premium affordable.