Moving into a new home without initially acquiring a homeowners policy would be unimaginable. After all, it would help if you had the protection home insurance provides when disaster strikes. Home insurance can help pay to rebuild your home after a fire, replace stolen personal property or pay medical bills if a guest suffers an injury while visiting you. Still, your homeowners’ insurance goes up if you make a claim. However, filing a claim can lead to a premium increase depending on several factors. Your home’s claim history can impact your premium, and if you file numerous claims, you can expect your insurer to hike your rate. Certain types of hazards cause the highest percentage of losses and consequently lead to the highest premium increases. However, your home’s claims history can also impact your insurance rate. Losses caused by fire, lightning, and wind often lead to the highest rate increases. Hence, insurers offer many discount options to help you reduce your premium.
Why do claims increase home insurance premiums?
By insuring your home, an insurance company assumes financial risk. However, when you file a claim for a covered loss, the insurer must meet its financial obligation by paying what it legally owes. According to the Insurance Information Institute, between 2014 and 2018, U.S. insurers paid nearly $13.7 billion, just in property damage claims. You purchase homeowners’ insurance to cover losses when disaster strikes. Still, when you file a claim, the provider may consider you a higher risk and more likely to file more shares in the future. When that happens, the carrier may increase your insurance premium. Therefore, if you can afford to pay out of pocket for minor losses, you can avoid a potentially costly increase. The severity of claim and frequency of claim history for both the home and insured play a role in potential rate increases.
How long does a claim affect your homeowners’ insurance?
Typically, claims filed in the last three years have the most impact on your home insurance rate. Catastrophic losses, like a complete rebuild following a fire, liability losses, all have a more significant impact on your rate. Filing two claims in five years will lead to a rate increase, and filing a third claim could prompt the insurer to terminate your policy, making it difficult for you to find another provider, and your claims-filing history is significant. Insurance companies store claims data to the CLUE database. So, when you apply for a home insurance policy, the insurer will access the database to determine if any owner has filed an insurance claim on the property. However, if a previous owner filed several claims on the property, the insurer may decide that you likely will file additional claims in the future and charge you a higher rate. Hence, only the homeowner and insurance companies can request a CLUE report.
How to keep your homeowners’ insurance rates low?
If you're looking for a new home, shop around to find the lowest rate. However, if you own a home already and want to reduce your premium, the following may help you achieve a lower rate; Increase your deductible – a low deductible can seem like an excellent way to save on your homeowners' insurance, after all, the lower the deductible, the less you'll have to pay out of pocket if a covered loss occurs; Pay your bills on time – however, depending on the state, but insurance companies can sometimes use your credit rating as a factor when determining your premium; Install safety and security devices – you can also earn a discount for installing a security system, and an increasing number of insurers offer reduced rates for homes equipped with smart home devices, and so on.