Posted inInsurance

Why filing a claim raises your insurance rates

Fender bender car crash

Key takeaways

  • Filing an insurance claim can have long-term ramifications, such as a hike in your premium or difficulty in switching providers in the future.
  • Certain types of claims, such as dog bites or slip-and-fall incidents, can have a significant impact on your rates and may even disqualify you from coverage with some carriers.
  • It may sometimes be more financially beneficial to pay out of pocket for minor damages where you are the only driver.
  • You can potentially save on your insurance after a claim by raising your deductible, using discounts, increasing security measures and driving safely.

Although filing an insurance claim can bring needed financial help after an incident, you may not want to file a claim for everything. Claims often have long-term ramifications. In many cases, it leads to a hike in your rate of premium. Sometimes, it may also affect your ability to switch providers and get coverage in the future.

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What is an insurance claim?

An insurance claim is basically a formal request for money to the insurance company by the insured to help pay for expenses resulting from a covered peril or loss. First, the insurer reports the damage to the insurer, completing paperwork and submitting the claim. Next, the insurance provider will evaluate the incident by sending a claims adjuster to the scene.

If a claim is approved after the evaluation, the insured will receive a check from the insurance company to pay for the expenses (minus the cost of the deductible). The Insurance Information Institute estimates that one out of 20 policyholders usually files a claim each year.

Why do insurance claims affect your rates?

Once you file a claim, your provider may begin viewing you as a risky customer, which may result in price hikes to your premium. This increased attention to your risk profile usually lasts three to five years.

But it’s worth noting that certain types of claims can affect your rates more than others. For example, rate hikes due to weather-related damage are possible, but they tend to be less significant than other claims. Also, keep in mind that more than one claim in your recent history is also highly likely to increase your premium or exclude you from eligibility from some carriers.

Here are some other relevant homeowners insurance claims and how they may impact your rate:

  • Dog bites: Statistically speaking, some dog breeds are more likely to cause harm to your guests than others, including but not limited to pit bulls, German shepherds, Great Danes and Dobermans. A dog bite claim in your past is likely to have a significant impact. For some carriers, you’d be disqualified, while others may limit liability. Regardless, you’ll likely have a higher-than-average premium.
  • Theft: Robberies often signify that your neighborhood is becoming increasingly unsafe, which can raise home insurance rates for the entire community. Insurance claims for theft are also highly scrutinized since only 43% of homeowners keep an inventory of their belongings (Triple-I, 2020).
  • Water damage: If the water damage was caused due to negligence, your premiums will most certainly rise, considering how expensive these claims can be.
  • Slip and fall: If one of your guests gets injured due to hazardous conditions on your property, you could be in for a steep rate hike if they decide to file a claim against you for medical expenses.
  • Fire: This claim may have the highest rate impact and may be most likely to disqualify you from getting coverage from some carriers.

With auto insurance claims, you’re more likely to see a rate increase after at-fault accidents or accidents that also correspond with violations or tickets speeding. Less impactful claims scenarios for auto tend to be comprehensive claims, like hitting an animal or hail damage.

You’ll also want to read the fine print in your car insurance policy to see if you have accident forgiveness, which essentially means your first at-fault accident won’t negatively impact your rate.

Should you avoid filing a claim to prevent rate changes?

It depends. If the cost to repair the damages to your car or house doesn’t outrageously exceed your insurance deductible, it may be a better long-term financial decision to defer the claim and pay out of pocket.

However, car accidents that cause injuries or property damage to other parties should be reported to the insurance company immediately. Regardless of whether you decide to file a claim, you’ll still want to report the incident to your provider in the event the other party chooses to file against you. In this scenario, it’s recommended that you gather evidence from eyewitnesses and obtain the police report to solidify your side of the story and protect yourself from potential rate hikes.

Can you save on your insurance after a claim?

Insurance claims can cause your insurance rate to increase for a temporary amount of time, typically three to five years. However, there are still ways that home and car owners alike can save during this probationary period:

  • Raise the deductible: Your deductible is the amount you pay for a claim before your insurance company starts chipping in. As a result, your provider will typically trade you a lower premium for a higher deductible.
  • Use discounts: Even if you have a claim(s) against your record, you can still qualify for home and auto discounts. From bundling to paperless billing, your insurance agent will gladly discuss your savings opportunities — because more often than not, these discounts benefit you and them.
  • Increase security: Investing in a home security system or storing your car in a more secure location like a garage may be rewarded with insurance savings, considering these actions should reduce claims.
  • Drive safely: You may be able to get your insurance rate back in check by avoiding accidents and traffic tickets for multiple years in a row.

Frequently asked questions

    • All insurance claims are recorded in either of two databases: Comprehensive Loss Underwriting Exchange (CLUE) and A-Plus. Records remain in the former for seven years and five years in the latter. You can request a copy of each to review the accuracy of your records.
    • If you are the only party involved (i.e., hitting your mailbox), you could compare repair costs to your deductible and decide whether or not to file a claim. If another driver is involved (i.e., low-speed rear-ending), there is no way to ensure financial accountability if you do not involve insurance even if both parties agree to pay out of pocket for the damage.
    • Claims related to weather damage typically do not cause a spike in the rate, but this is not guaranteed and can vary from one insurer to another.
    • The more insurance claims you file, the more expensive your premium will likely be. Filing many insurance claims may also result in your provider canceling your policy.

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