Why filing a claim boosts your insurance rates

Insurance is designed to help people in times of crisis. It provides financial assistance for certain incidents, so that they don’t have to spend a lot of money all at once. It can offer financial assistance if you have to file a claim.

Although filing an insurance claim can bring needed help, you may not want to file a claim for everything. Long-term consequences can often be a result of claims. It can lead to an increase in your premium. It can also impact your ability to change providers or get coverage in the future. You should think twice before you call your insurance company to report covered damage or loss.

What is an insurance claim?

In the simplest terms, an insurance claim can be described as a formal request for money to the insurer by the insured to help pay for expenses resulting from a covered peril or loss. This involves reporting the damage to insurance companies, filling out paperwork, and then submitting the claim. After this, an insurance company will send a claims adjuster on the spot to assess the situation. This investigation is often a key factor in determining whether a claim will be approved or rejected.

Your insurance company will send you a check to cover the costs of your claim, less the cost for your deductible. The Insurance Information Institute estimates that one out of 20 policyholders usually files a claim each year.

How do insurance claims impact your rates?

Insurance companies will always be wary of red flags. Once you file a claim, your insurance company will consider you a risky client and attempt to recover the claims amount through a price increase. The rate change typically lasts three to five years. All types of claims can have a different impact on your premiums.

Some of the most likely claims to cause a price increase for homeowners include:

  • Dog bites: The highest number of home insurance claims consist of dog bite cases. It can be difficult to find home insurance if you have a pit bull, Great Dane, German shepherd, Great Dane, or Doberman. Insurance premiums can rise after a single attack.
  • Theft: These claims of theft can be suspicious and require proof of purchase as well as a police report. The premium rate may rise if your home is in an unsafe area due to theft or burglary.
  • Water damage: Insurance companies should be aware of the high cost of water damage repair. Premiums will rise if the damage was caused by negligence or disrepair. Homeowners are better off avoiding water damage claims if the expenses are lower than the deductible.
  • Slip and fall: Insurance companies should be aware of any hazardous conditions on your property that could lead to injury. Your premiums could rise if you file a slip-and-fall claim after someone is hurt at your home.

Because the policyholder isn’t responsible for weather-related damage, a price increase does not always occur. While a single claim for home insurance may not result in an increase in premiums, more than one claim within three years will likely cause a rise.

Auto insurance claims are much more volatile than home insurance and it cannot be said with certainty exactly which ones will cause your premium to rise. Every case is unique and will vary from one insurer. Some insurers forgive the first accident, but it is not guaranteed. If the damage to property or injuries are not severe, it is best to avoid filing a claim.

Do you need to file a claim in order to prevent rate changes?

Some circumstances may require a claim. However, sometimes it is possible to avoid filing a claim. You must report to your insurance company immediately any car accident that causes injury or property damage.

There are always chances for another person to file a claim if they are involved in an accident. Call your insurance company and report the accident to them, even if you have suffered minimal damage. If there is a claim by the other party, a formal account will be in your favor. Your insurance company will get the details even if your state does not require a report.

Are you able to save money on your insurance after a loss?

Although it is possible to save money on insurance once you have filed a claim, claims will remain in your file for up to three to five years. This history will be used by insurance companies to screen and evaluate you. There are ways you can lower your premiums after a claim, regardless of whether you own a car or a house.

  • Raise the deductible: One of the easiest ways to lower your insurance premium is to raise your deductible. If you have to file a claim, you should carefully think about whether you can afford the deductible.
  • Discounts: You can get home and car insurance discounts even after you have filed a claim. The best discounts are offered by all insurance companies.
  • Protect your home: Home insurance discounts are often available for those who take steps to prevent water damage, mold, theft and fire.
  • Driving safely: Avoiding tickets and accidents for several years can make you a good impression on your insurance company. This could lead to a price reduction over time.

Questions frequently asked

What is the process of recording claims?

All insurance claims are stored in one of two databases, Comprehensive Loss Underwriting Exchanges (CLUE), or A-Plus. The former holds records for seven years, while the latter lasts five years. To verify the accuracy of your records, you can request a copy.

What are the best times to not file a claim

It is best to avoid filing a claim if your damages are minor or your deductible is less than your expense.

Are my rates going to go up after I have weather damage to my home?

Weather damage claims are unlikely to cause an increase in your rate. However, this is not always the case and may vary from one insurance company to another.