Does Homeowners Insurance Go Up After a Claim?
Many homeowners make a claim without thinking twice. However, your home insurance premiums could rise after a claim. In fact, most claims will raise premiums.
Keep reading to discover everything you need to know about how homeowners insurance premiums go up after a claim.
Homeowners Insurance Premiums May Increase Each Time You Make a Claim
Every time you file a homeowners insurance claim, your insurer is likely to increase your premiums.
Insurance is all about risk. If you have had homeowners insurance for 30 years without making a claim, then your insurer likely considers you a low-risk policyholder.
However, if you’ve had homeowners insurance for 10 years and have made 3 major insurance claims, then your insurer probably considers you a medium-risk or high-risk homeowner. Whether it’s your fault or not, you’ve had multiple major claims that have cost your insurer thousands of dollars.
You should expect to pay higher premiums for around 5 years after a claim.
How Much More Will I Pay?
Homeowners insurance premiums typically rise 15% to 35% after making a single claim.
If you make a second claim within a 5 year period, your premiums could rise another 60%.
According to the Insurance Information Institute, the average homeowner in the United States pays $1,249 per year for homeowners insurance.
You’ll pay higher or lower premiums based on things like:
- Your location
- Natural disaster risk in your area
- Your history of claims
- The value of your home and your possessions
- Coverage options, including any additional coverages you may have purchased
- Coverage limits
The most important factor in home insurance premiums is risk. Insurers consider how likely you are to make a claim.
The Severity of Each Claim Matters
Insurers don’t just consider the number of claims you have made; they also consider the severity of each claim.
If you made two claims for $3,000 in fire damage because of two small kitchen fires, for example, then your insurer will treat you differently than if you burned down your $300,000 home twice.
Insurers consider things like:
- Claim history
- Claim type
- Claim amount
Insurers treat fires more seriously than weather-related claims, for example. Someone with two house fires in a 5 year span is a high-risk person to insure, while someone with two tornado insurance claims in a 5 year span may have bad luck.
Home Insurance Premiums Rise Nearly Every Year
According to the III, homeowners insurance premiums rise around 3% each year.
However, homeowners insurance premiums may have risen even higher in recent years because of inflation.
Inflation leads to higher-value homes, more expensive home repairs, and more expensive material costs.
As inflation causes prices to rise, insurers need to raise premiums to compensate.
Although the average homeowner paid $1,249 for home insurance in 2018, that number could be closer to $1,500 today.
It’s not just inflation: bad weather is also causing insurance premiums to rise. As severe weather events become more common, insurers are raising rates to compensate.
Homeowners insurance companies may also raise rates because of rising theft or crime rates in your area. If the likelihood of a burglary has increased, for example, then your homeowners insurance company may raise your rates.
Some Claims Raise Premiums Higher than Others
Some types of claims are more likely to raise insurance premiums than others.
- A single fire damage insurance claim, for example, will usually raise premiums by 25% to 35%
- Insurers are generally less harsh with weather-related claims; if you make a claim for weather damage, then your premiums may only rise 10% to 20%
- Theft, liability, and water damage claims are some of the worst claims for higher insurance premiums; you might expect to pay 20% to 30% higher insurance premiums after a theft, liability, or water damage claim
- Making a second claim for fire, theft, liability, or water damage within a 5 year period could cause rates to rise 50% to 60%
- Making a second claim for weather-related damage within 5 years may only cause premiums to rise 20% to 30%
How Do Insurers Check Your Claims Record?
When buying a new homeowners insurance policy, the insurer may ask about your claims history. How does the insurer verify your claims history? Can an insurer really check your previous fire damage insurance claims in a different state?
Yes, insurers can and do check your claims history.
Insurers check your claims history using the Comprehensive Loss Underwriting Exchange (CLUE) database.
CLUE is a nationwide registry of claims operated by LexisNexis, a consumer reporting agency. CLUE provides insurers with your previous five years of insurance claim history.
Whether you filed a claim in a different state or in your current state, it will appear on your CLUE record – as long as it occurred within the past five years.
If you’re unsure whether or not a claim appears on your record, request a copy of your CLUE report from LexisNexis.
When to Pay for a Claim Out of Pocket
You’ll likely pay higher insurance premiums after a claim. That’s why it may not always be in your best interest to file a claim. Instead, you may want to pay out of pocket.
When to file a claim:
- If the cost of repair far exceeds your deductible, then you may want to file a claim. If it’s going to cost $10,000 to repair your damaged kitchen after a fire, for example, and your deductible is $1,000, then it might be in your best interest to file a claim.
- You would also likely want to file a claim for any other significant damages or complete losses, regardless of your deductible. If your house burns down, or if a tornado destroyed significant parts of your home, then it’s almost always going to be in your best interest to file a home insurance claim.
Remember: insurance exists to protect you against unexpected events. Although you’ll pay higher rates after a loss, your insurer is still obligated to pay full compensation for your loss.
When not to file a claim:
- When the cost of repairs and replacements is close to your deductible, it may not be worth it to file a claim. If someone broke your living room window, for example, and it will cost $1,200 to repair the window, then it may not be worth making a home insurance claim. If your deductible is $1,000 and your premiums will rise 20% to 30% after a claim, then it makes a lot of sense to cover the repair by paying out of pocket.
- If you’ve made a claim in the last 5 years, you may want to pay out of pocket for the next claim, especially if it’s minor. Making a single claim can raise premiums by 15% to 35%. However, making a second claim could raise premiums another 50% to 60%. In this situation, you may be better paying out of pocket even for costlier claims.
- If you’ve made 2 or more claims in the last 5 years, then it may not be in your best interest to make a claim. If you have multiple major home insurance claims in a short period, then your insurer could decline to renew your policy. That may mean you need to buy insurance from a high-risk provider.
Final Word: Do the Math When Facing Higher Premiums
Overall, you need to do the math.
Is it worth making a claim today and paying higher insurance claims in the future? Or am I better paying out of pocket and avoiding higher premiums?
It’s expected for Insurers to raise rates after a loss, and it may or may not be in your best interest to file a homeowners insurance claim.