Your Guide to Home Insurance Rates

A homeowners insurance policy provides peace of mind. After all, it can help pay for damages and losses in the worst-case scenario, such as a fire or severe storm, as well as a burglary or injury on your property. Is it true, however, that filing a claim will result in an unexpected increase in your homeowners insurance premium?

Stay with us as we dissect the most common risks to help you determine whether your policy will see a premium increase—and how you can avoid it.

Do Homeowners Insurance Rates Increase After a Claim?

Although you should never hesitate to use your homeowners insurance in the event of an emergency, such as a burglary or fire damage, it is important to understand that filing a claim can result in an increase in your monthly premiums. Why?

You buy homeowners insurance to cover your losses in the event of a disaster. In addition, when you insure your home, an insurance company assumes financial risk on your behalf. As a result, when you file a claim, your provider must meet its financial obligations by paying what it is legally obligated to pay.

As a result, if you file a claim, your provider may view you as a higher risk and more likely to file additional claims in the future. When this occurs, the insurance company may temporarily raise your insurance premium. The amount your premium will rise after a claim is determined by a number of factors, including:

Your personal claims history: If you have a history of filing claims at previous homes or places where you lived, an insurer may view you as a higher risk of filing additional claims and raise your rate as a result.
Frequency of claims in your area: If a major storm causes extensive damage in your city, your insurance rate may rise significantly more than if you filed a single property damage claim.
Type of claim: Insurance companies do not treat all claims equally. In fact, some events are thought to occur more than once. As a result, they become a higher financial risk, which can raise premiums and make it difficult to obtain coverage in the future. The following claims are the most likely to result in a rate increase or nonrenewal:
Claims for water damage or mold
Claims of theft
Fire insurance claims
Claims for liability or dog bites

If you file a claim for any of these hazards, you should pay close attention to your policy deductible. The typical homeowners insurance policy has a deductible ranging from $500 to $2,000. If you file a homeowners insurance claim for any of the above-mentioned most dangerous hazards, you should pay close attention to your policy deductible. After all, filing a claim that isn't even twice your deductible amount may not be worth it.

For example, if you experienced a home theft that resulted in $3,000 in losses and your plan has a $1,000 deductible, you will benefit financially from that claim. Depending on your loss history, your premium may rise slightly, but you'll still receive a $2,000 reimbursement to help you replace what was stolen.

In that same situation, however, a $2,000 deductible may not be worth the risk. Your insurer would still pay $1,000, but it could be a small enough sum to cover your losses on your own and avoid a rate increase. This decision, however, will be unique to each individual, as it will be determined by your financial situation as well as the value of the stolen property.

How Much Will Your Homeowners Insurance Premium Increase?

As previously stated, whether or not your insurance premiums rise after a claim is largely determined by the type and amount of the claim, as well as your claims history.

According to a study commissioned by Insuroma, US families who file a single homeowners insurance claim can expect their annual premium to rise by up to 21%. The study used a hypothetical two-story, single-family home insured for $144,000 with a $500 deductible to show how much annual rates can rise for claims such as fire, hail, liability, medical, theft, vandalism, water (non-weather related), weather (except hail and wind), and wind.

The percentage amount, however, varies greatly depending on where you live. Minnesota and Connecticut, for example, saw the highest increases, at 21 percent each, while New York and Florida saw the lowest increases, at 1 and 2 percent, respectively. The percentage increase in premium rates is largely determined by state regulation.

For example, Texas insurance law prohibits insurers from raising premiums on first-time claimants.According to Texas insurance law, insurers are not allowed to raise rates on first-time claimants. As a result, filing a single claim in Texas will result in no increase in premiums.

How Long Do Home Insurance Claims Stay on Your Record?

Homeowners insurance claims can stay on your record for three to seven years, depending on the insurance company. Most businesses can gain access to your claims history through national databases that track claims for a set number of years.

The most well-known customer claims record database is the Comprehensive Loss Underwriting Exchange (CLUE). Claims may remain on your CLUE report for up to five years, and insurance companies may use this information to raise your rates or deny you coverage. It also includes information on claims made against your property prior to the purchase of your home, which is usually up to five years.

How to Avoid an Increase in Your Homeowners Insurance Rates

Here are some steps you can take to keep your homeowners insurance premiums from rising after a claim:

Only file catastrophe claims: When submitting insurance claims, use caution. If your home sustained minor damage and you can pay for it out of pocket, that may be your best option. Keep your home insurance claims for natural disasters or significant property loss.
Examine your CLUE report: Request a copy of your CLUE report to obtain your personal 5-year loss history as well as the loss history of the property from previous owners. This is especially true if you intend to buy a new home. If a potential home has a history of mold growth or water damage, you may want to avoid living there due to the possibility of insurance rate increases.
Consider your deductible: Try to avoid filing claims that are less than twice the amount of your insurance deductible.

See How Much You Can Save on Homeowners Insurance

Now that you know what causes these increases, it's time to find a provider who will provide you with the best rates possible. And, with our quick and affordable online insurance quotes, we're here to make the search for home insurance coverage easier than ever. Get your free quote today and have peace of mind knowing that your home and family are prepared and safe.