I have some bad news for you. Filing a claim of any type will typically raise the premium on your homeowners insurance. Whether it is due to your negligence, or to your son’s German Sheppard. Be it a lightning strike or a burst pipe, if you file a claim, and your insurance provider pays for damages, your rates will increase in most cases. It seems unfair doesn’t it? Especially in cases when you had no control over the factors contributing to the claim.
The first thing that you need to realize is that your homeowners insurance is not a maintenance plan. By this I mean that you shouldn’t make a claim for every little thing that happens to your home. Sure, there may be coverage for it, and the insurance provider is required to pay if coverage applies, but if you make a claim every time a shingle blows off your roof, your rates will increase, and probably your neighbor’s too. Realize that for your claim, aside from the amount paid to you or in your behalf, there are adjusters to be paid, claim representatives to be paid and many more incremental costs. The cost to the insurance company for your $1,000 claim is probably more like $1,500-$2,000. Since no business (insurance companies included) can survive by laying out more than they are taking in, they have to increase what they are taking in, when there outlay increases.
Your homeowners insurance is meant to protect you in the event of a large or catastrophic loss. A big fire, or a burst pipe that has done a large amount of damage, things of that nature. While making a claim in these events will still increase your premium cost, you are more likely to be willing to accept the increase. For example, if your home sustains $50,000 in damage, and all you have to pay is your deductible, you probably won’t feel to bad about an increase of $200 per year that will last for three years or so. On the other hand, if you have a $1,500 loss and you pay your deductible, and then still see a $200 per year increase, you won’t probably be very happy, simply because in the long run, the increased premium ends up costing you more, than if you had just paid the extra money yourself.
Here’s some information that may shock you. Earlier in this article it was mentioned that if you made claims your rates would increase and probably your neighbor’s too. Here’s the reason. Insurance of all kinds is a pool. In essence when you buy insurance on your home, you are also agreeing to help insure your neighbors homes. The idea is great, because you only stand to lose whatever you pay for premium plus your deductible in the event of a loss. That looks a lot better than losing whatever your home cost out of your pocket. The downside is that in a bad claim year, even if you don’t make any claims and have not made any claims for a long time, your premium will probably still go up. That is because of the pool principle.
Trust me, your insurance company is not trying to gouge you. The insurance industry is one of the most regulated industries in existence. In most states, the state has to approve rate increases before they take effect. If your premium increased, just remember the claim they paid for you, or look at your neighbors who made a claim every time the wind blew.