You have homeowners insurance for a reason. If something bad happens to your home due to weather, fire, or some other external source, you want to make a claim on your insurance. It makes sense; after all, you pay the premiums. But, unfortunately, it’s not always a good idea.Get today’s insurance rates.
A study conducted by InsuranceQuotes.com shows that just one claim can cause a homeowner’s insurance premium to increase as much as 9%. That’s just the average, though. In some states, the premium can increase more than 30%. Yet homeowners in other states, like Texas, don’t experience any premium increase after a claim.
What’s the Determining Factor?
You probably wonder at this point, what makes the premiums go up in one state but not another? It all comes down to the state laws. Each state has their own requirements regarding what they let insurance companies do. Certain states don’t allow premiums to increase at all following just one claim while others don’t monitor it at all.
The Types of Increase After a Claim
Now to complicate things even further, the amount your premium increases depends on the type of claim. The most expensive claim is a liability claim. Things like a dog bite, someone falling on your property, or damages caused by an intoxicated guest have the largest damage on your homeowner’s insurance premium.
Next in line of premium increases is for fire, theft, vandalism, and water damage. From there, the effect of a claim on your premiums decreases significantly. Most other claims are weather-related. While they are not preventable, they can cause serious damage to a home, but they have the least impact on a homeowner’s insurance premiums.Shop and compare insurance quotes.
How Insurance Companies Determine Premiums
Did you know that your homeowner’s insurance premium actually has very little to do with you? It’s based on the area, weather, and occurrences that have already gone on in the area. For example, if you buy a pre-existing home, an agent will look back at the C.L.U.E report. This report shows insurers what claims have been filed on the property over the last five to seven years. If there have been a few claims already filed, you’ll end up with a higher premium right off the bat.
How Many Claims are Too Many?
This all begs the question, just how many claims are too many? There’s no universal answer, but you should always be leery of filing another claim.
If you know the history of the home and know how many claims have already been filed, this should help you with your decision. Usually, the third time is the charm. In other words, the third claim could make an insurer not renew your policy the next time around.
When Should You File a Claim?
Now that you know the detrimental effects of filing a claim on your homeowner’s insurance, how do you know when it’s okay? Generally, you should hold off if the amount of the damages are less than your deductible. For example, let’s say you have a $2,000 deductible. The damages you want to file with the insurance company total $1,500. What’s the point of letting them know of the damages? You’ll still have to pay for the repairs. In the end, you shoot yourself in the foot. You increase your premiums, in most cases, plus have to pay out of pocket for the repairs.
If the damages greatly exceed your deductible, though, you may not have a choice. Serious weather damages are a good example. In fact, because insurance companies are least likely to increase your premiums after weather-related damage, it makes sense to file that claim if it will cost you more than your deductible.
In the end, it’s a personal decision. Talk to your homeowner’s insurance agent, but watch what you say. Maybe you want to feel him out first in a hypothetical situation. Don’t give away too much information or he could make note of the occurrence whether you file a claim or not. Either way, the damages will cost you, either out of pocket or in the form of your premium down the road. Make your decision carefully so it doesn’t cost too much.Get the right insurance coverage.