A homeowners insurance company sets its customers’ rates based on risk. If you file one or more claims, an insurer may deem you a higher risk and raise your premiums. Whether your rates will jump and by how much will depend on the type of claim(s) you file, whether you file multiple claims in a short amount of time and which company insures your home.
Expensive Claims Often Lead to Rate Hikes
If your homeowners insurance company has to pay out a large sum to cover a claim, you can expect to see an increase in your rates. If someone gets injured at your home or bitten by your dog, that can lead to an expensive liability claim. The insurance company may be required to cover medical bills, legal fees and a settlement.
An insurer may raise your rates if the type of loss is likely to happen again in the future. For example, if you live in a high-crime area and file a claim for theft, the insurance company may raise your rates because there is a good chance that your home will be burglarized again. If you file a claim for water damage, the insurer may think it’s likely that you will file additional claims in the future for water damage and/or mold.
A hurricane, tornado or other severe weather event that causes significant damage to your home and others nearby may lead to an increase in your premiums. Insurance companies may cover their losses by raising rates for all their customers in the region.
Filing More Than One Claim Can Lead to Higher Rates
If you submit two claims to your homeowners insurance company in five years, your premiums may go up. If you file a third claim, the company may cancel your policy. If that happens, you may have a hard time getting insurance through a different company because it may assume that you will file multiple claims if it grants you a policy.
Other Factors May Impact Your Premiums
How long a claim will affect your premiums will depend on the insurance company. A claim is likely to lead to higher rates for a few years, but a particularly large claim may have a longer-lasting impact on your rates.
Each state has its own laws that regulate insurance companies. Some state laws prevent insurers from raising premiums after homeowners file a single claim or after policyholders file certain types of claims.
Sometimes It’s Better Not to File a Claim
If you suffer a loss, you might be better off not filing a claim with your homeowners insurance company if the cost of repair or replacement isn’t much higher than your deductible. Covering expenses out of pocket can prevent a rate hike and can also keep you from being penalized for filing multiple claims if you experience another loss in the near future.
