Every year, at least one out of 20 insured homes in the U.S. files a claim for damages to their house property, as reported by the Insurance Information Institute. Once you file a claim, your insurance rate may increase by up to 40%, depending on the type and size of claim you make, and in other cases, the number of your previous claims. In 2017, there was a 1.6% increase in the homeowners insurance premiums in the U.S., as reported by the National Association of Insurance Commissioners (NAIC).
Here are some of the underlying factors that may increase your homeowners insurance rates after you file a claim.
1. Type of Homeowners Insurance Claim
In general, home insurance claims resulting from water damage, personal injuries, theft, and fire are among the most common claims that can substantially increase insurance rates, as per the Insurance Information Institute. When combined, all these factors account for at least 98% of property damage in homes.
Water-related losses are by far the most types of homeowners claims, with around 20% of all floods in Texas occurring outside high-risk areas, as reported by the Texas Department of Insurance. Though your standard homeowners insurance will cover sudden and accidental water damages, you will have to carry separate flood insurance for other forms of water damage and flooding. Thus, your insurer will regard such disasters as high-risk compared to damages resulting from incidents such as a tree falling on the roof. Also, because such claims are common, insurance companies tend to increase rates to cover possible future losses.
2. Personal Liability Claims
Personal liability coverage pays for medical expenses, lost wages, and other incidental expenses for people you may have injured. It also covers damages caused to a third party’s property and legal expenses incurred on accident-related lawsuits. Thus, personal liability claims can potentially result in huge insurance payouts causing your premiums to rise substantially. They can affect your insurance rates and coverage to such an extent that your insurer may refuse to insure you because of your previous liability claims.
3. Number of Previous Claims
Though homeowners insurance is designed to help you recover after a named peril damages your house, filing too many claims within a relatively short period may lead to a non-renewal of policy or an increase in your premiums. Your insurance carrier will look at your home’s CLUE report to determine your property’s claims history. Take note that a CLUE report maintains a record of your home’s claims history for up to seven years. Thus, if you’ve owned your home for less than seven years, your insurer will not only take into account your claims history but also the claims made by the previous owner of the property, if any. In general, if you file more than one home insurance claim within ten years, your home insurance costs will likely increase. However, adding safety features like security cameras would cancel out such a claim-related increase in premium.
These are some of the factors that may trigger a rise in your homeowners insurance premium. Taking practical steps like checking your CLUE report, filing only significant property loss claims, or limiting the total number of claims can prevent your insurance rates from escalating. You must also evaluate your deductibles and avoid filing claims that do not exceed twice the value of your deductibles.
Do you have more questions concerning homeowners insurance? Contact the experts at Mike Leonard Insurance Agency in Texas. We can connect you with our top insurance carriers, including Kemper, MetLife, Nationwide, Travelers, Safeco Insurance, Progressive, and American Strategic Insurance, to find the coverage you need.