Will Filing an Insurance Claim Raise My Rates?

9/23/2021 (Permalink)

Maintain your property in New Bern, NC, to reduce the rate increases of the insurance claim.

Homeowners purchase insurance to cover damage caused by natural disasters and other catastrophes. However, many homeowners fear that filing an insurance claim may cause their rates to go up. This guide covers some of the basics about how filing a claim may affect your insurance premiums.

How Filing Claims Affects Your Rates

An insurance policy is a contract between you and an insurance company. The insurance company promises to pay for damages caused by covered perils in exchange for your premium payment. Most insurance contracts are for a specific period of time, such as six months or one year. Insurance companies may choose to charge a different rate or refuse to renew the contract at the end of the term. Several factors can affect whether your rates may go up:

• Number of claims filed
• Dollar amount of the claims filed
• Type of claim
  

Types of Claims That May Lead to Rate Increases

Unlike auto insurance, whether or not the homeowner is at fault does not play a large role in rate increases. This is because a home flood caused by a hurricane is not anyone's fault. However, some aspects of homeowner's insurance are more in the control of the policyholder. For example, the water damage that is caused by failing pipes that the homeowner didn't properly maintain may be a red flag to an insurance company. In addition to water damage, claims for mold, slip-and-fall personal injury claims, and dog bites frequently result in rate increases.

Typical Amount of Rate Increases

A typical insurance claim may result in a rate increase between 20% and 40% that may last between two and five years. If your insurance company opts to non-renew your policy, you may be charged higher rates from other insurance companies or have to seek insurance in a high-risk market.

Deciding When To File a Claim

Because not all insurance companies are the same, it is a good idea to talk to your insurance agent before you file a claim. Small claims are less likely to affect your rates, but may not be worthwhile because of your deductible. Have this discussion before you need to file a claim. Otherwise, your agent may report it to the insurance company, even if you decide not to file. The safest strategy may be to only file claims when catastrophic losses occur. If a couple of shingles blow off your roof, you may want to fix that yourself. However, if your entire roof needs replaced, it may make more sense to file a claim.

Saving Money on Your Policy

If you plan to only file claims when you have a large loss, you can save money by choosing a higher deductible. You can reduce the chance of rate increases by keeping your property maintained, calling a remediation company in New Bern, NC, to address issues that can lead to mold growth, and removing hazards that could lead to liability claims.

You do not need to be afraid to file an insurance claim; however, it can be wise to choose a strategy that minimizes your chances of rate increases. Your insurance professional can help you make decisions about your policy that can save you money.