All that recent snowfall might have been beautiful in the moment, but it might be taking a toll on your home’s roof. If the weight of snow and ice has caused your roof to collapse, forcing you to file a claim with your homeowners insurance provider, you’re not alone. According to the Insurance Information Institute, roughly one in 20 insured homes files a claim each year. But what happens to your insurance premium after filing such a claim? Will you ultimately be penalized for using your insurance coverage by seeing a rise in your rate?
The answers to these questions are more complex than you might think. In this article, The Simple Dollar team breaks down exactly what happens after you file a homeowners’ insurance claim and how such claims ultimately impact your monthly premium.
[ More: The Best Homeowners Insurance Companies ]
What is a home insurance claim?
A homeowners insurance claim is what gets filed with your insurance provider after you’ve experienced a qualifying loss on your home. Typically, standard homeowners’ insurance policies are designed to cover the following situations:
- Fire and smoke damage
- Weather- or storm-related damage
- Internal water damage not caused by flooding
- Theft
- Vandalism
- Snow or ice damage
- Damage incurred from civil disturbances
When you experience a loss that’s covered in your insurance policy, you will file a claim with your provider to receive financial assistance with needed repairs or replacement services. This keeps homeowners protected from financial ruin when the unexpected happens.
Do claims raise my premium?
The short answer — yes. Whenever a claim gets filed, it’s reported to the Comprehensive Loss and Underwriting Exchange (CLUE) database, which is accessible to all insurance providers and underwriters. This is where each policyholder’s individual risk profile is logged so insurance providers know which consumers are considered “high-risk” due to their claims history. People who have a history of filing claims at previous residences are viewed as riskier, and therefore will experience a rate increase after filing with their carrier.
However, even if it’s your first time filing an insurance claim, you’re likely to see an increase in your monthly premium. According to a recent study by Insurance Quotes, homeowners can expect the following premium increases on average based on the type of claim they file:
- Liability Claims: 14% increase
- Fire Claims: 13% increase
- Theft Claims: 13% increase
- Vandalism Claims: 13% increase
- Water Damage Claims: 12% increase
- Hail Damage Claims: 6% increase
- Wind Damage Claims: 6% increase
- Medical Claims: 2% increase
- Weather Damage Claims: 2% increase
The study further notes that U.S. families filing a single homeowners insurance claim can expect their annual premium to increase by 9% on average, regardless of the type of claim that’s filed.
How long do claims stay on my record?
Because insurance claims are all filed within the CLUE database, the length of time that a claim stays on your record remains pretty standard across insurance carriers. Once a claim is recorded in the database, you can expect it to remain on file between five and seven years. During this period, insurers will be able to see an increase on your risk profile, leading to an increase in your premium. Only after the reported claim has been removed from your record will it cease to affect your insurance rates.
[ Read: How to File a Home Insurance Claim ]
Four ways to avoid increasing your premium
According to the Insurance Information Institute, the average homeowner pays $ 1,211 annually for coverage. The more claims that are filed, the higher that premium will become. In order to save on your homeowners insurance premium, consider the following:
Avoid filing claims
Let’s go back to that collapsed roof from earlier. You might have been expecting such damage to occur since your roof is old and unable to withstand the demands of winter weather. Rather than waiting for the inevitable collapse and filing a claim, it would have been more financially prudent to save for roof replacement and pay for it out-of-pocket so you could avoid a rate increase.
Ask your carrier
When you’re shopping for coverage, be sure to ask your insurance agent whether or not your rates will increase after filing one or more claims. Also, ask them if it matters how far apart claims are filed, and record the answers for later reference. This will help you understand how your claims will impact your monthly payment so you can plan accordingly.
Increase your deductible
It’s always a good idea to seek a higher deductible, as this will lower your monthly premium tremendously. However, be sure that your higher deductible is something you are financially comfortable with paying out-of-pocket if you need to file a claim. A deductible that’s too high can end up backfiring in the long-run if you’re unable to afford the upfront cost of coverage before insurance kicks in.
Ask about discounts
Many times, homeowners shop for coverage without realizing that there are multiple discounts available for which they may qualify. Even a simple act like signing on for automatic payments can result in a decreased premium if your carrier provides a discount for paperless billing. Be sure to ask your insurance provider about any discounts they have available that can help reduce your monthly financial obligation.
[ See: What Home Insurance Discounts Are Available? ]
By following these simple steps, you can avoid increasing your premium while keeping your home protected from the unexpected.
Too long, didn’t read?
After filing a homeowners insurance claim, the average homeowner can expect a 9% increase to their premium, regardless of whether or not it’s their first time filing. Claims typically stay on your record between five and seven years, during which time this information may be used as justification for increasing your rates. To avoid increasing your premium, identify potential hazards in your home early, and plan to pay for repairs or replacements out-of-pocket, so you don’t have to file a claim. Always consult with your insurance provider to find out how claims will impact your rates, what available discounts there are that can reduce your monthly payment, and how high of a deductible you can afford to help further decrease your premium obligation.
We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.
