Why filing a claim raises your insurance rates
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.
Filing a claim with your insurance company can feel like a double-edged sword: On the one hand, you’ll get the financial coverage you pay for in premiums; on the other hand, you’ll likely see your rate increase. But there are good reasons why your insurance increases after a claim — and understanding them can help you navigate the claims process and its aftermath.
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Powered by Coverage.com (NPN: 19966249)
Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
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 files a claim in any given year.
In most cases, the cost of your insurance will go up if you file a claim. But why does filing a claim increase car insurance? Let’s take a closer look at how insurance companies view your claim history.
Why do insurance claims affect your rates?
The price of your home or auto insurance is based on risk — specifically, the risk that you’ll file a claim, which will cost your insurance company money. Before you file any claims, that risk calculation is based on rating factors like age, location and credit score.
An actual claim on your insurance history communicates to insurers that you carry a higher risk for future claims. As a result, your insurer will likely put a surcharge on your policy for at least three to five years — at which point, if you’ve stayed claim-free, you’ll likely see your rates ease up.
But it’s worth noting that certain types of claims can affect your rates more than others. For example, if you file a claim due to weather-related damage, it’s likely to impact your premiums less than claims involving driver fault. Also, remember that more than one recent claim is highly likely to increase your premium or even exclude you from eligibility from some carriers.
Here are some 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. Some carriers may disqualify you, 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 47 percent of homeowners keep an inventory of their belongings.
- 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 most likely 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 a serious moving violation, such as a DUI or reckless driving charge. Smaller tickets, like speeding, will also lead to rate increases. Less impactful claims scenarios for auto tend to be comprehensive claims, like hitting an animal or hail damage. Comprehensive claims do raise rates in many cases, but the impact on your premium may be smaller.
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 damage to your car or house doesn’t significantly 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, even if the other party wants to “keep insurance out of it.” Failure to report an accident — or to stay at the scene of an accident — can be a significant legal misstep and could cause your insurance premium to go up.
Regardless of whether you file a claim, you’ll still want to collect the other driver’s information and report the incident to your provider if the other party files 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 both 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.
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