According to a recent report, homeowners who filed just one insurance claim saw their premiums increase by an average of 9% — and a second claim caused premiums to climb as much as 20%. Interestingly, the size of the claim didn’t matter much. Filing a small claim for a stolen bicycle could affect your rates about the same as filing a large claim for tornado damage.
Increases varied widely by state, however, and all types of claims were not treated the same way. The most costly were liability claims, which are made when someone gets hurt, and claims for theft and vandalism.
Unfortunately, it may not be possible to escape a rate hike by switching insurers. A database called the Comprehensive Loss Underwriting Exchange (CLUE) tracks all auto and property insurance claims — as well as inquiries about potential claims — for seven years.
To hold down your homeowners insurance costs, you could avoid filing small claims and rely on your insurance only for major, or catastrophic, events. You might also consider choosing a higher deductible (the amount you must pay out of pocket before the insurance company pays the covered amount on a claim, up to the policy limits). In fact, raising your homeowners insurance deductible from $500 to $1,000 could save as much as 25% on the annual cost.
Sources: CNNMoney, October 27, 2014; Insurance Information Institute, 2014
The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright 2015 Emerald Connect, LLC.
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