Insurers have access to a database called the Comprehensive Loss Underwriting Exchange (CLUE) Report, which provides information about your claims history. As a result, filing a claim can affect your premiums for up to seven years.
Homeowners insurance protects you against a wide range of losses, from theft to extensive fire damage. In exchange for that protection, you pay a monthly, quarterly, semiannual, or annual premium to your insurance company. How much you pay depends on many factors, but the average homeowners insurance premium is $1,854 per year as of 2022.
If you already have a homeowners policy in place, filing home insurance claim documents can cause your premium to increase substantially. Here’s what you can expect, along with tips for reducing your premiums in the future.
Why Premiums Rise After You File a Claim
Insurance companies make money by collecting premiums and trying to limit their expenses as much as possible. One of the main ways they limit expenses is by managing risk carefully. The ideal customer is someone who pays premiums every month and never files a claim, as the insurance company can simply collect the premiums and not have to worry about paying out in the event of a fire, flood or other covered events.
When you file a claim, the insurance company has to dip into its funds to pay it. In the eyes of insurance executives, that makes you a liability. To account for the increased risk, the company increases your premium.
Types of Homeowners Insurance Claims
How much your premium increases after filing home insurance claim documents depends on the type of claim you file. If you file a wind, hail, medical, or earthquake claim, you can expect an increase of around 7% to 9%. The average premium increase due to a lightning claim is 10%. Other types of claims may increase your homeowners insurance rates by 20% or more. Examples include fire claims, theft claims, liability claims, and vandalism claims.
How to Save Money on Your Homeowners Insurance Policy
The good news is that there are several things you can do to keep your insurance premiums as low as possible. Follow these tips to keep your insurance expenses in check.
Know When to File and When Not to File
Even if you have a covered event, it’s not always worth filing a claim with your insurance company, especially if the claim is a small one. For example, if you have a $750 deductible and only $1,000 worth of damage, it probably doesn’t make sense to file a claim. Your insurance company won’t cover anything until you’ve met your $750 deductible, which means you’d only get a check for $250.
With the average premium exceeding $1,800 for 2022, a 10% premium increase would cost you about $180 per year. It’s not worth paying $180 per year extra just to get $250 for your covered loss.
Do Regular Home Maintenance
Regular maintenance doesn’t just keep your home in good shape; it can also help keep your premiums low. Insurance companies have the right to send someone to inspect your property and make sure it’s in good condition. If the inspector notices a problem, you may receive a notice directing you to repair or replace it. Failure to comply can lead to cancellation of your coverage, making it more difficult to get an affordable policy with another insurance company.
A lack of maintenance can also cause your insurance company to deny a claim, even if the loss is normally covered. If your claim is denied, it still goes on your CLUE report, meaning it can affect your insurance premiums, even if you never receive any money from the insurance company.
Bundle Your Coverage
Many insurance companies offer discounts to customers who bundle several types of coverage into one policy. For example, your insurance company may charge less if you bundle your home and auto insurance together.
Increase Your Deductible
In insurance terms, a deductible is the amount of money you must pay before your insurance company starts to cover anything. If you purchase a homeowners insurance policy with a deductible of $500, for example, you have to pay $500 before your insurance company covers any additional costs.
If your policy has a low deductible, your insurance company is taking on a greater portion of the risk, which means your premium is higher. To reduce your premium, choose a higher deductible when it’s time to renew your policy.
File a Dispute
The Comprehensive Loss Underwriting Exchange Report is covered under the Fair Credit Reporting Act, so you have the right to dispute any inaccurate information that could cause your premium to increase. One common inaccuracy has to do with calling an insurance representative to discuss a covered loss. Even if you decide not to move forward, the insurance company may place a $0 claim on your CLUE report, causing your premiums to increase.
When you file a dispute, the company is required to conduct an investigation. The insurer is also required to remove inaccurate information from your file, which may protect you against unexpected premium increases.
In many industries, loyal customers qualify for discounts and other perks. That’s just not the case in the insurance industry. In fact, insurance companies typically offer their best rates to entice new customers to purchase coverage. Once you have a policy, you may find that the rate increases drastically when it’s time to renew.
To avoid significant premium increases, don’t stick with your insurance company out of a sense of loyalty. Shop around and make sure you’re really getting the best rate. If you’re not, don’t hesitate to switch insurers. Smart shopping can save you hundreds or even thousands of dollars on your insurance premiums over the years.
However, if you are particularly fond of your company, just ask your agent for a policy review when it comes time to sign on for another term. Sitting down and talking through options can be enough to save you the headache of switching and some extra bucks in the process.
Gain Confidence With Your Homeowners Insurance Policy
When disaster strikes, you’ll be glad that you have insurance. However, a claim filed on your homeowners insurance policy will almost always result in a heftier premium. Luckily, there are a number of things you can do to mitigate the cost and keep your insurance costs in a comfortable place. If you aren’t sure where to start, a quick call to your agent will get the ball rolling and help you decide if it’s time to switch carriers.
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