Does Homeowners Insurance Go Up After a Claim?
Homeowners insurance rates typically increase after a claim.[1] You could pay more in premiums, and you could lose any discounts the company gives you for a claims-free status.
You may balance the risks and decide filing a claim is still a smart idea. If you’re facing thousands of dollars in damages you can’t cover any other way, paying a little more in premiums could seem like a smart move.
After that claim, taking a few reasonable precautions and making some core repairs could ensure that you don’t pay more than you should to protect your home and belongings.
Why Does Homeowners Insurance Go Up After a Claim?
Insurance is designed for use. Why should you pay more for something you need in an emergency? The answers are complex, but in general, a claim tells an insurance company that something about you or your home is a little riskier and should cost more.
Every company uses a different formula to determine homeowner premiums. Most include the following common factors in addition to your claim history:[2]
- Your home’s age
- Your roof’s age and construction
- Where you live
- How expensive your home would be to replace
- Your credit score
Your claim history matters, as it demonstrates the need for a payout. However, the impact of a claim can vary. If you get a small settlement for something unusual (like a theft), the insurance company may not penalize you as much as they would if you got a big payday after a repeatable problem (like a windstorm).
The more claims you file, the more your rates might rise. Repeated events demonstrate that something about you and your house is truly broken, and you haven’t taken steps to fix it.
Almost all homeowners have seen premium increases within the last decade. Experts say inflation and climate change are typically to blame.[3] But a claim history can be a huge red flag for an insurance company.
Some states are hard hit by climate-related problems, and all homeowners have filed associated claims.[3] In Florida, premiums increased an average of 40% in 2023 alone. In Louisiana, they rose 63%. Making your home in a state where claims are common can have a big impact on your budget, even if you never file a claim.
What Happens After a Claim?
The choices you make immediately after your payout can directly impact your future costs. Make a smart decision here, and you could reap the rewards for years.
Think of the period immediately after your claim as a high-risk time. File another claim within a few days, weeks, or months, and expect to pay even more when your insurance is renewed.
Use your time, energy, and extra money to make your home resilient, and you could mitigate any rate hikes. For example, if you lost items in a burglary and install security doors and windows, you could prove to the insurance company that you took the risk seriously and tried to fix it.
If you do face another issue with your home or property, determine if filing another claim is really worth it. Maybe you could make a repair out of your own pocketbook and save some money down the line. Try not to file another claim unless it’s absolutely necessary.
Since so many other factors go into your premium rate, make adjustments where possible. Pay your bills on time to keep your credit rating up, replace your roof with newer materials, and keep your head down.
If you move to a new area, you may still face a higher homeowners insurance rate. Companies use your claims history when determining the cost of any policy, whether it’s old or new.[1] Moving away won’t solve the issue, but making smart choices will.
Maximize Your Insurance Benefits
You’re not required to accept a higher homeowners premium without taking mitigation steps. The following ideas can help you ensure that you’re not paying more than you should:
1. Ask About Rewards
If you’ve never filed a claim during your home ownership, ask the insurance company for a price break. If you have filed a claim, ask when you’ll be eligible for a price break again.
Many insurance companies offer additional price breaks for good behavior. For example, you could save money by buying your car insurance through the same company. You might also get a discount for your age or membership in a program like AARP. Don’t be afraid to ask about these programs and see if you qualify.
2. Fix Your CLUE Report
The Comprehensive Loss Underwriting Exchange (CLUE) keeps a seven-year record of all auto and personal property claims.[4] Companies use this data to determine how much to charge you in premiums. Every year, you can ask for a free copy. If you spot errors (like claims that should have been removed), you can ask the company to fix them, and you might see your rate drop.
Make a point of reviewing this data every year, and know when your claim should fall off the report. When it does, you shouldn’t face any kind of penalty for your prior home incidents.
3. Make Your Home Safer
Preventive care can enhance your home’s value and reduce the risk of a future claim. Some insurance companies reward your investment with a lower premium. If you take any steps to make your home more resilient, tell your insurer about it and ask for a price cut.
Climate-based challenges vary by location. Know which risks are highest in your area, and plan accordingly. The following actions are grouped by common climate risks:[5]
- Erosion: Anchor or relocate your home.
- Earthquakes: Anchor top-heavy items, brace suspended ceilings, store flammable products, and latch your cabinets. Relocate or anchor items on open shelving.
- Flooding: Replace carpet with tiles, install a sump pump, and use flood-resistant insulation.
- Severe winds: Build a safe room, add storm shutters, and replace windows with shatterproof glass.
- Storm surge: Elevate your home, reinforce your garage door, seal cracks, and trim damaged trees.
- Wildfire: Use fire-resistant roofing, replace exterior cladding, enclose your foundation, and install multi-pane windows.
4. Invest in Technology
“Smart” homes can reduce your risk of catastrophe, and some insurance companies offer discounts for them.[6] Computer-generated information can help speed up the claims process, and in some cases, it can eliminate the risks altogether.
Many Americans are unaware of modern sensors that can detect smoke, fire, and water.[7] Installing them can mean alerting officials (or the homeowner) when the problem is small and easier to manage. If you install these sensors, your insurer may lower your premiums.
5. Negotiate Your Post-Claim Rate
With all of the steps we’ve outlined, you’re in a good position to haggle for a better rate. Keep a detailed spreadsheet of everything you’ve changed and improved, along with receipts that demonstrate your investment. Share them with your company and reiterate your commitment to preventing future claims.
If the company won’t budge, ask what you could change to alter next year’s outcome. Maybe there’s one little shift you haven’t made yet that could make a big difference.
Don’t be afraid to shop around and ask for a different insurance provider. Maybe another agent would be swayed by your hard work and dedication.
How to File a Homeowners Insurance Claim
You’ve done the homework, considered your options, and decided that filing a claim is the right idea.
A typical claims process involves the following steps:
- Document the damage. Take measurements and photos of all the problems caused by the incident. Ideally, you’ll have detailed notes about what the space looked like before, so you can provide before/after data to the insurance company.
- Contact the company. Every insurance organization’s filing process is different. In most cases, the work starts with a call to your insurance agent. Explain what happened and ask what you should do next.
- Prepare for inspections. Your agent will send out a professional to examine the loss in person. You can be present during the inspection, and it’s wise to be available and answer questions.
- Accept a settlement. Your insurance company will offer a monetary reward to repair or replace what you lost during the event.
Essential documents you might need include the following:
- Your insurance policy
- Your home inventory, completed before the event
- Receipts or invoices that demonstrate what the losses are worth
- Before/after photos of the loss
- Your personal identification information
- Contact information for your home mortgage company (if applicable)
How Much Does Homeowners Insurance Go Up After a Claim?
Every insurance company is different, as is every claim. While almost all companies will adjust their prices after a payout, some charge more than others.
Researchers working for PolicyGenius examined the impact of claims from several insurance companies.[8] Here’s what they found:
Company | No claims | 1 claim | 3 claims | 5 claims |
AAA | $1,930 | $2,147 | $4,798 | $10,962 |
AIG | $1,266 | $1,452 | $1,959 | $2,188 |
Allstate | $1,717 | $1,930 | $2,904 | $4,446 |
American Family | $1,799 | $1,984 | $2,899 | $6,677 |
Farmers | $1,969 | $2,157 | $3,852 | $9,698 |
USAA | $1,547 | $1,634 | $2,174 | $2,842 |
Claims can also be emotionally taxing and difficult. Filling out the origin paperwork begins a process that can last for months. It might involve many arguments, meetings, and disagreements. Sometimes, it’s inevitable. But sometimes, opting out is a better choice. Consider the full picture to determine what is best for you.
Sources
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Will My Premium Go Up if I File a Claim? Texas Department of Insurance.
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How Are Your Auto and Homeowners Insurance Costs Calculated? Texas Department of Insurance.
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Why Home Insurance Costs So Much and How to Pay Less. (March 2023). Consumer Reports.
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LexisNexis CLUE (Auto and Property Reports). Consumer Financial Protection Bureau.
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Activities to Reduce Risk for Your Home. Federal Emergency Management Administration.
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How Smart Homes are Changing Insurance. (August 2023). Insurance Thought Leadership.
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Why Insurers Need to Raise Awareness for Certain Smart Home Tech Products. (November 2023). Insurance Business.
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Does Homeowners Insurance Go Up After a Claim? (August 2023). Policy Genius.