Does Homeowners Insurance Go Up After a Claim?

Filing a homeowners insurance claim can influence future policy costs. The extent of this impact is not uniform and depends on factors insurance providers consider when assessing risk.

Key Factors Affecting Premium Changes

The type and severity of a claim significantly influence premium changes. Liability claims, which involve substantial legal fees and medical bills, often lead to more significant premium increases than property damage claims. Non-weather-related water damage, such as from a burst pipe, or theft claims can also prompt higher rates because insurers perceive them as more likely to recur. Conversely, catastrophic weather events, while costly, might be viewed differently if they are widespread and less indicative of an individual property’s specific risk.

The frequency of claims is another important consideration. Filing multiple claims, even for smaller amounts, within a short timeframe, such as three to five years, can signal a higher risk to providers than a single, isolated incident. Insurers analyze a policyholder’s claims history to predict the likelihood of future claims, and a pattern of multiple claims can lead to a policy being deemed higher risk.

The deductible amount selected by a homeowner also influences premium rates. Choosing a higher deductible means the homeowner agrees to cover a larger portion of a claim out-of-pocket, which can result in lower premium payments. Conversely, a lower deductible typically corresponds to higher premiums.

A homeowner’s overall claims history, extending beyond just the most recent claim, is thoroughly reviewed. Insurers consider past claims on the property, even those filed by previous owners, when calculating premiums for a new policyholder. The location of the property also interacts with claim history; homes in areas prone to specific natural disasters or with high crime rates may face higher premiums, especially after claims related to those risks.

In most states, a policyholder’s credit-based insurance score can affect their homeowners insurance rates. These insurance scores are derived from credit history and are used by insurers to assess risk. Insurers have found a correlation between higher credit-based insurance scores and a lower likelihood of filing claims, leading to more favorable rates. Conversely, a lower score might indicate a higher risk, potentially leading to increased premiums.

The Role of Claim History Reports

Insurers track a homeowner’s claim history through comprehensive databases. The Comprehensive Loss Underwriting Exchange (CLUE) report is a widely used system for this purpose. Generated by LexisNexis, a CLUE report provides a detailed record of property and auto insurance claims. This report allows insurers to assess risk and determine appropriate premiums when underwriting new policies or renewing existing ones.

A CLUE report typically contains information such as the policyholder’s name, policy number, the date and type of loss, and the amount paid out for the claim. It also indicates whether a claim was open or resolved and includes the property address for homeowners policies. This data provides insurers with a comprehensive overview of a property’s claim history, often covering a period of up to seven years.

Homeowners are entitled to obtain their own CLUE report annually, free of charge, under the Fair Credit Reporting Act. This allows individuals to review their claim history for accuracy and understand the information insurers use to evaluate their risk.

Understanding Policy Adjustments After a Claim

After a claim is filed, homeowners might observe several direct consequences on their insurance policy. One common adjustment is the application of a premium surcharge, an additional fee added to the regular premium. This surcharge reflects the insurer’s assessment of increased risk associated with the property following a claim and can last for several years, often three to five. The amount of the surcharge can vary based on the claim type, severity, and the policyholder’s overall claims history.

Another adjustment involves the potential loss of claim-free discounts. Many insurers offer reduced rates to policyholders who have not filed claims for a specified period. Filing a claim, even a minor one, can result in the forfeiture of these discounts, thereby increasing the overall cost of the policy.

In certain circumstances, particularly after multiple claims or specific types of high-cost claims, an insurer might choose not to renew a homeowner’s policy. This decision is a risk management strategy for the insurer, indicating that the property or policyholder is now perceived as too high a risk to continue coverage under existing terms. While not an immediate cancellation, non-renewal requires the homeowner to seek new insurance elsewhere.

A claim history can also affect a homeowner’s future insurability. Insurers review past claims when a new application for coverage is submitted, and a history of multiple or severe claims can make it more challenging to secure new insurance from different carriers. Some insurers may decline to offer coverage to applicants with a certain number of recent claims, such as two claims within the last five years. This can limit options and potentially lead to higher premiums from the few insurers willing to provide coverage.