Does Homeowners Insurance Go Up After a Claim?
Key Facts
- If you make a claim, your homeowners insurance rates will typically increase.
- A claims history can be a red flag for insurance companies, as it suggests that you’re more likely to file future claims.
- After a payout from a claim, making improvements to lower your home’s risk and make it more resilient could mitigate homeowners insurance rate increases. Proving you take the risks seriously and have taken steps to reduce them could go along with insurers.
- If you aren’t happy with your homeowners insurance rates, you can shop around or try to negotiate a lower rate with your insurance company.
Homeowners insurance rates typically increase after a claim.[1] You could pay more in premiums, and you might lose any discounts the company gives you for a claims-free status.
Even after balancing the risks, you may decide you still want to file a claim. If you’re facing thousands of dollars in damages that 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 or improvements could ensure you don’t pay more than you should to protect your home and belongings. Improvements, such as adding a new roof or electrical system or installing a centrally monitored alarm system, could potentially lower your risk and offset increases to your premium due to a claim.
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 suggests to an insurance company that you’re more likely to file a claim in the future, so your insurance should cost more.
Every company uses a different formula to determine homeowner premiums. Most consider the following 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
- Whether your home has security features, such as sprinkler systems and centrally monitored alarm systems
Your claim history matters, as it suggests you may be more prone to filing another claim in the future. However, the impact of a claim can vary depending on the type of claim, the severity of the damage, and the amount of the payout.
If you get a small settlement for something unusual, such as a lightning strike to a well pump, the insurance company may not penalize you as much as they would if you got a big payday after a repeatable problem, such as water damage.
Almost all homeowners have seen premium increases within the last decade. Experts say inflation and climate change are typically to blame.[3] However, a claim history can be a huge red flag for insurance companies.
Some states are hard hit by climate-related problems, and many homeowners have filed associated claims.[3] In Florida, premiums increased an average of 40% in 2023 alone. In Louisiana, they rose 63%. Having a home in a state where claims due to natural disasters are common can significantly impact your premiums, 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 wise 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.
After a payout, 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 face another issue with your home or property, determine whether it’s worth it to file another claim. Maybe you could pay for the repairs yourself and save some money down the line. Try not to file another claim unless it’s absolutely necessary.
Expert Take
If you missed something on your original claim, you may not have to start a new claim. In some states, you can simply reopen your original claim, so be sure to check with your insurance company or agent.
Since so many other factors affect 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. Lisa Koosis, a former claims specialist, notes, “However, different areas may have different risks. For example, if you live on the Florida coast and move inland where there’s less chance of damage due to storm surge, your rates may decrease simply because there’s less risk.”
Maximize Your Insurance Benefits
You’re not required to accept a higher homeowners premium without taking mitigation steps. Following these steps could help ensure 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 discount. If you have filed a claim, ask when you’ll be eligible for a price break again.
Many insurance companies offer additional discounts. 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 such as 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), compiled by LexisNexis, keeps a 7-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, such as claims that should’ve 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, depending on the nature of the improvements. For example, installing new cabinets won’t help you reap a lower premium, but replacing an aging water tank might.
If you take any steps to make your home more resilient, tell your insurer and ask for a price cut.
Climate-based challenges vary by location. Know which risks are highest in your area, and plan accordingly. Some actions you can take for common climate risks include:[5]
- Erosion: Anchor or relocate your home.
- Earthquakes: Anchor top-heavy items, brace suspended ceilings, store flammable products according to local safety ordinances, 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, install multipaned windows, and leave defensible space around your home.
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, 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 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. Another agent may know which companies are likely to offer the best discounts or rate decreases for certain types of improvements.
How to File a Homeowners Insurance Claim
You’ve done the homework, considered your options, and decided to go ahead and file a claim.
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 company representative. Explain what happened and ask what you should do next. They’ll submit all documentation, including photos, receipts, and any written statements.
- Prepare for inspections: Your agent will send 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, assuming the claim was approved and/or the amount was satisfactory. Insurance companies have an appeals process that can be pursued if a claim is denied. If the settlement offer isn’t what you’d hoped for, you might be able to negotiate a larger amount. Contact your insurance company or their agent for information on how to proceed.
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, and so is every claim. While many companies adjust their prices after a substantial payout, some charge more than others.
Researchers working for PolicyGenius examined the impact of claims from several insurance companies.[8] The following table highlights rate increases based on claims:
Company | No Claims | One Claim | Three Claims | Five 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 original paperwork begins a process that can last for months. It might involve many conversations, meetings, and disagreements. Sometimes, it’s inevitable. But sometimes, opting out is a better choice. Consider the full picture to determine what’s 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.