Does Filing a Homeowners Insurance Claim Always Raise Your Rates?

Imagine a tree falling on your roof or a pipe bursting and flooding your living room, damaging the carpet and lower cabinets. Ouch! That’s a lot of financial pain. If you are insured, your first approach will be turning to the insurance provider. But wait for a while! Is that the right approach? Wouldn’t it make your insurance premium go high? 

Well, many homeowners worry that filing an insurance claim will automatically lead to a higher premium, and that is true in most cases but not always. So, this blog will dive deeper into scenarios where insurance premiums can jump and where they won’t have an effect! 

What is an Insurance Claim?

To clarify things a little more, a homeowner insurance claim is like asking your insurance provider to pay expenses when accidents turn into financial losses. You document everything, and the insurer pays for the coverage as per the agreement. However, it’s not as straightforward as it seems. Insurance companies deny paying if they find the reason for the claim is deliberate. 

Understanding the Factors Influencing Premiums

Not all premiums are the same, nor are all claims. There are multiple factors that influence your premium, and claims are one of them. However, they have the highest impact on premiums. Below are major influences:

Claim Frequency and Severity:

One of the most considerable factors for a higher homeowner insurance premium is claim history and severity. The higher the claim amount, the more it tends to result in higher premiums, while minor claims don’t really impact the premium rates. For instance, a minor claim for window repair will not impact premiums, while the roof damage that requires roof replacement will reasonably trigger higher premiums. 

Further, claim frequency also impacts your insurance bill. It can also result in the homeowner insurance companies cancelling your insurance after a certain number of claims. 

Type of Claim:

All types of claims are not equal, and the same goes for their impacts. For instance, water damage seems to be a higher risk as compared to hail damage. Moreover, human-made accidents jump your premium, while “Act of God” has little to no impact. 

Location and Risk Factors:

Not only claim history but also the probability of a claim can also result in a higher insurance rate. If you live in a high-risk area where the chances of natural disaster or theft are higher, the insurance premium is expected to be increased. 

Moreover, insurance companies use statistics like weather patterns and crime rates to affect your premiums. 

Insurance History:

Insurance history can also affect the insurance rate. A previous claim can result in higher rates. For a person who has no claim history, the price will be lower than one with one or multiple claims. 

When Claims Might Not Increase Your Rates

Well, it’s necessary to know that all claims don’t convert into increased rates. Specifically, claims that don’t involve human interaction have little to no effect on premium. Below are some cases where a claim might not increase your insurance price:

“Act of God” Claims:

Natural disasters have less of a direct impact on individual rates. However, bear in mind that standard homeowner insurance doesn’t cover major natural disasters. Hurricanes and tornadoes might be covered, but you will need dedicated flood insurance for floods.

First-Time Claims (Sometimes):

Some insurers might be more lenient with first-time claims, especially if they are minor.

Claims Below Your Deductible:

If the claim amount is less than deductible, you will likely not file it. So, it will not be considered a proper claim and hence there will be no impact on the premium. 

Proactive Steps to Minimize Rate Increases

When it comes to maintaining a fair premium rate, it is essential to save your home from any kind of accident. Here are some steps to follow:

• A regular check on home maintenance is necessary. Every six months or a year, audit your home condition and replace or repair anything that can cause problems in the future.
• If you have a good budget and emergency fund in hand, it’s better to increase your deductible (the amount you will pay upfront for a claim). 
• Don’t just buy the first quote you get. Shop around and compare quotes, or simply choose Smart Apple. We will compare prices for you and present the best deals available.
• You can also bundle up insurance when you are buying more than one insurance policy. 

Final Thoughts:

Claims don’t always raise rates, but it’s a complex issue. Events that involve human intervention likely raise rates as compared to claims that happen as “acts of God.” It’s crucial to consult with your insurance agent to discuss specific situations.

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