June 24, 2024
Does your homeowners insurance go up after a claim?

 

Homeowners insurance is important for ensuring both your financial security and to help maintain the roof over your head in the event of the unexpected. If your home suffers damage from anything from a break in to a natural disaster, homeowners insurance can pay out for repairs and replacements needed. However, homeowners may question, “Does home insurance go up after a claim?” While your home insurance will be affected following a claim, understanding what can happen to your insurance premium can help you decide whether it’s worth it to file one.

 

How much does your homeowners insurance increase after a claim?

Filing a home insurance claim may cause your premium to increase temporarily. The amount your premium will increase after a claim depends on a variety of factors, including:

 

Type of claim

Extent of the damage

Where you live

Your personal claims history

It is also possible for your home insurance rate to increase based on the frequency of claims in your area. For example, after a major hurricane that causes extensive damage in your community, your insurance rate might increase more substantially than it would if you filed a single property damage claim.

 

With a clean claims history, the average annual cost of homeowners insurance with $300,000 in dwelling coverage is $2,151. The table below highlights several types of claims, the average payout and average annual rate after the claim.

 

Type of claim Average dollar amount of claim paid out* Average annual rate after a claim

Wind $12,913 $2,254

Liability $31,663 $2,286

Theft $4,646 $2,301

Fire $83,519 $2,299

*Based on the Insurance Information Institute’s (Triple-I) estimates of average home claim payouts. Average rates based on a claim filed on a home insurance policy with $300,000 in dwelling coverage.

 

Why do insurance premiums go up after filing a claim?

Homeowners insurance rates often increase after a claim because it leads your insurance company to believe that you are more likely to file another claim in the future. This is especially true for claims related to water damage, dog bites and theft. To compensate for another potential claim payout, the property insurer proactively raises your premium.

 

As mentioned, whether or not your insurance premium increases after a claim is situational. Certain types of claims affect insurance rates more than others. You should expect your rate to go up after a claim if you fall into any of the following categories:

 

You live in an area with severe weather

Your home is located in a high-crime area

You have filed liability claims in the past

You own a home with a history of claims

You file more than one claim over several years

Generally speaking, your insurance premium is more likely to increase if you file a liability claim rather than a property damage claim. With a liability claim, there is a chance that you could face a lawsuit. Legal fees and court settlements can be very expensive, which means there is added risk for you and your insurance company.

 

How long does a claim affect home insurance rates?

If your homeowners insurance rate increases after a claim, know that it is not a permanent rate hike. Most claims stay on your record for roughly five years. However, this depends on the insurance company. A claim could remain on your record for as little as three years or as many as seven years. After that time, your premium should go back down, although it may not return to the original rate.

 

Learn more: Affordable home insurance companies

 

Are there times when companies are not allowed to increase rates after a claim?

There are many situations when property insurance companies can raise your rate after a claim. But there are also certain situations when an insurance company is not allowed to increase your rate. Because insurers are regulated at the state level, consumer protection laws vary based on your location.

 

Some of the situations that prohibit insurance companies from raising premiums include:

 

When a homeowner inquires about filing a claim, but does not submit one.

When a homeowner files a claim that does not result in a payout (denied claim).

When a homeowner files a single claim.

When a homeowner files a claim due to natural disaster damage.

As a homeowner, it is important to understand the consumer protection laws in your state. You can contact your state’s department of insurance to learn more about the restrictions where you live. You can also contact your insurance company to find out what situations are exempt from rate changes.

 

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