How Do Claims Affect Your Homeowner’s Insurance?

Seasonal hazards such as big winds, wildfires, fallen trees, and torrential rain can come with hefty repair bills. Plus, there could be other unexpected challenges for homeowners who submit a property damage claim to their homeowner’s insurance.

Premium Increases

Submitting a claim with your Homeowner’s insurance can cause a premium increase. You can typically expect a rate hike or increase your risk of policy cancellation if your claim falls in any of the commonly claimed loss types below:

• Water damage, such as from burst pipe or plumbing leak
• Mold
• Liability claims, such as dog bites or a fall on your property
• Damage caused by a fallen tree
• Severe weather damage to fences, roofs, and other areas of your home
• Fire damage
• Losses from theft or break-ins

Where you live also affects your premiums. In California, climate change related events such as wildfires have left many policyholders with devastating hikes and non-renewals. If you live in a high crime area or an area previously evacuated by wildfires, your insurance premiums may be more expensive due to your proximity to risk.

Finally, multiple claims within three to five years may negatively affect your premiums or eligibility for a policy renewal. Before you file a claim with your Homeowner’s insurance, consider discussing the impact of such a claim with your agent or broker. Sometimes the benefits of filing a claim will be outweighed by the future costs. If you’re not careful, a premium increase can outpace the cost of what you’re trying to fix, or worse, leave you with a non-renewed policy and no homeowner’s insurance coverage.

The Impact of Your Claims History

If you have filed a claim with your homeowner’s insurance recently, the good news is that your claim won’t stay on your claim history forever.

The Comprehensive Loss Underwriting Exchange (CLUE) is a national insurance database that compiles a record of your claims history, which includes dates of claims, claim payouts, type of losses, denied claims and more. Insurance companies contribute information to a home’s CLUE report and will price your insurance policy according to their predetermined formula for underwriting risk.

Generally, claim frequency during the first three to five years after a loss or claim will have the most impact on increasing your premiums or having a policy non-renewed. Most of the large insurance companies in California will not write a new policy for you if you have had a claim within the last three years. Additionally, each insurance company’s recordkeeping practices will differ, and some carriers will lower your premium after the three-year or five-year mark, but some may even factor claims for up to seven years.

It’s important to shop around for quotes from multiple companies, because even if one insurer is offering insurance at an unaffordable rate, another may offer you the same coverage at a more reasonable price. After seven years, your claim will drop off from the CLUE report, though it’s worth mentioning that there’s no existing regulation that will prevent an insurer from using claim information older than seven years. An insurer can still access their own internal database of claims to view the loss history on a property, even if the loss no longer shows on the CLUE report.

Requesting Your Claims History

Much like your credit report, the Fair Credit Reporting Act (FRCA) allows you to request one free copy of your CLUE report every 12 months. You are allowed to contest mistakes or ask for amendments to the report if you believe your claim record is inaccurate. Common reasons you might be paying higher premiums for include claims attributed to the wrong person with a similar name, duplicate claims, or wrong information about the amount paid, claim date, or the claim type.

To request a copy of your report:

• Go online to https://consumer.risk.lexisnexis.com/consumer
• Call by phone at 888-897-8127

If you are purchasing a home, you can ask the current homeowner to request the report so you can review it for any claims prior to buying the home. A previous homeowner’s claim history does impact your premiums and future ability to insure the property, even if you haven’t lived there before.

Protecting Your Home

A property’s claim history can impact your insurance rates, but it is important to realize that it is not the only variable insurance companies consider when they underwrite your policy. Although you hope that you’ll never have to file a claim, making sure you have sufficient dwelling coverage and keeping your home well maintained is the first step to protecting your home. Your home is a major investment so making smart choices about your insurance coverage and being aware of how your claim history impacts you, allows you to make proactive decisions about protecting your investment in the event of a catastrophe.

The information provided herein is for educational purposes only, and should not be construed as advice, including, but not limited to tax, legal, insurance, investment, or retirement advice. For your specific planning needs, please seek the advice of Integris Wealth Management, your tax accountant, attorney, insurance agent, or other professional as appropriate. Investing involves the risk of loss.