Does Homeowners Insurance Go Up If You Make a Claim?

Homeowners insurance provides essential financial protection for your dwelling and personal belongings against damage or loss. It also offers liability coverage for accidents on your property. This coverage is often mandated by mortgage lenders and provides financial security against significant burdens from events like fire, theft, or natural disasters. As homeowners consider filing a claim, a common question arises regarding the potential impact on their insurance premiums.

The Direct Impact of Claims on Premiums

Filing a homeowners insurance claim can lead to an increase in your premium. Insurance companies operate by assessing risk, and a claim often signals a higher likelihood of future claims. From an insurer’s perspective, a policyholder who has filed a claim may represent an elevated risk profile, prompting a re-evaluation of their rates.

This adjustment in premium helps insurers offset claim payouts and account for the perceived increased risk. While not every claim guarantees a rate hike, it is a common outcome, especially for claims indicating a higher probability of recurrence. Insurers use claims data to recalculate premiums, aiming to maintain profitability while covering potential future losses.

Past behavior can indicate future risk. Even a single claim can alter how an insurer views a policyholder’s risk. This can result in a policy surcharge, typically lasting several years.

Key Factors Influencing Premium Adjustments

The extent to which a premium changes after a claim depends on several factors. The type of claim filed significantly influences the impact on rates. For instance, non-weather-related water damage, fire damage, or liability claims, such as those involving injuries, are often viewed as higher risk and can lead to more substantial premium increases than claims from events like wind damage.

The financial cost of the claim also plays a direct role; generally, more expensive claims result in larger premium adjustments. A claim for a minor repair might have less impact than a claim for extensive property damage requiring a significant payout. Insurers consider the severity of the loss when recalculating rates.

Claim frequency is another important factor. Filing multiple claims, even for smaller amounts, within a short period often indicates a higher risk than a single, large claim. Insurers may perceive frequent claims as a clear indicator of recurring issues, leading to more significant premium increases or even non-renewal of a policy.

A policyholder’s prior claims history, even with previous insurers, can influence current premium adjustments. Insurers use past claims data to determine future rates, as individuals with extensive claims histories are considered higher risk. The deductible amount chosen for a policy also influences decisions about filing smaller claims. A higher deductible means the policyholder pays more out-of-pocket before insurance coverage begins, which may deter filing minor claims and help avoid premium increases.

The location of the property and its susceptibility to specific perils can influence premium changes after a claim. Homes in areas prone to natural disasters or high crime rates may face higher premiums if a claim is filed, as underlying risk factors are already elevated. Insurers factor in regional risks when setting rates, and a claim can reinforce the perception of a higher-risk area.

Your Claims History and Its Long-Term Effect

Insurers maintain detailed records of past claims, which significantly influence future premiums. A primary tool for this is the Comprehensive Loss Underwriting Exchange, or CLUE, report. This database, compiled by LexisNexis, contains up to seven years of personal property and auto insurance claims history for a specific property and policyholder.

Insurers access CLUE reports when underwriting new policies or renewing existing ones to assess risk. The report includes details such as the date of loss, type of loss, and the amount paid on the claim. Homeowners can request a free copy of their CLUE report annually to review their claims history for accuracy.

The impact of a claim on premiums typically lasts for several years. Claims generally remain on a CLUE report for five to seven years, affecting insurance costs during this period. While the claim may eventually fall off the report, some insurers might retain internal records of past claims for longer durations.

Maintaining a claims-free history can yield benefits, such as no-claim discounts. Many insurers offer reduced premiums to policyholders who have not filed a claim for a continuous period, often 12 months or longer. These discounts incentivize responsible property management and can lead to lower insurance costs over time.