Filing Insurance Claims Can Raise Your Rate by 20% — When Is It Worth Doing So?

Male Motorist Involved In Car Accident Taking Picture Of Damage For Insurance Claim.
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Car insurance and homeowners’ insurance are mandatory expenses designed to protect others as much as they protect the policyholder. For instance, carrying liability insurance on your motor vehicle can result in the coverage of medical costs if another person is injured in a car accident while you’re driving — whether they are in your vehicle, on foot, or in another car. And homeowners insurance can help pay for property damage and also protect visitors, financially, in case they get injured in your home or yard.

See: Car Insurance Rates Expected To Rise 5% This Year After Double-Digit Gain in 2021
Find: Social Security: How To Appeal if Your Application for Disability Insurance Is Denied

In some cases — such as liability claims — you don’t have a choice but to file a claim. For instance, if you damaged someone else’s motor vehicle in an accident, they have a choice to file a claim against your policy. If something happens, it’s important to have the right levels of coverage.

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But what about making a claim for damage to your home or your vehicle? Is it worth it?

Studies show that, especially in the case of homeowners’ insurance, your policy premium rates can rise by as much as 20% per claim, Hippo.com reports. Whether it’s prudent to file a claim or not depends on a number of factors, including:

  • Your deductible.
  • The extent of the damage / cost of the claim.
  • The type of claim.
  • How many claims you’ve made in the past.

In some cases, repairing your home or vehicle won’t cost that much more than your deductible. If that’s the case, it’s easier and more affordable in the long run to forego insurance and just pay to get the damage repaired.

That’s why it’s important to try to have an emergency savings account — or a 0% interest credit card, at the very least — that you can use to cover unexpected expenses.

Filing multiple claims over a period of three to five years could even result in your insurance company dropping your policy, according to AARP.org. It’s highly likely you’ll pay even more for a new policy with a record of cancellation (or non-renewal) and a history of claims.

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So, when is it worthwhile to file a claim?

Obviously, for catastrophic damage to your home or vehicle, you’ll want to file a claim. Insurance, after all, offers peace-of-mind that you won’t face financial hardship if something happens to your home or vehicle — damage that you can’t afford to fix.

When you’re determining whether or not to make a claim, evaluate the cost of the damage. If it’s less than $1,500 more than your deductible, AARP.org says, it may be worth it to swallow the costs of the repairs. This number is called your “pseudo-deductible,” according to experts, and it’s the amount you are willing to pay over your deductible for damage to your home or vehicle before making a claim.

If you consider a worst-case scenario rate hike of 20% on a homeowners insurance policy of $1,854, the national average in 2022 according to Forbes, that’s a $370 annual increase. If you have the funds available, it may not be worth swallowing that potential rate hike. You could pay for the repairs upfront or continue paying for them in perpetuity for as long as you own your home. You also run the risk of having the insurance company refuse to renew your policy when it comes due.

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Plus, if you file a claim you’ll need to wait for the claim to be approved. While you are free to choose your own contractor for any repair project, choosing someone that doesn’t work with your insurer could lead to delays if there are unforeseen issues that require an adjustment on the claim.

If you’re a DIY-type person, you might even be able to save money by doing the repairs yourself, which you may not be able to do if you file a claim through the insurance company.

Some claims are more likely to elicit rate hikes than others, AARP says. Insurance companies are more likely to increase your rates following a personal injury or accident claim, or a claim of property damage that was due to negligence — or which shows evidence of a recurring problem.

“The easiest way to get your policy nonrenewed is to report a couple of water damage claims from plumbing leaks,” Bill Wilson, CEO of InsuranceCommentary.com, told AARP.org. Similarly, a home fire caused by a candle or cooking could increase your premiums.

Weather-related claims, on the other hand, typically will not result in a rate increase. But multiple natural disaster or weather-related claims in a region could cause an insurer to hike premiums in that region across the board. This happened concerning flood insurance on Long Island, N.Y., following the destructive superstorm Sandy.

Finally, you’ll want to consider how many claims you’ve made in the past five to seven years, since that’s how long a claim remains on your record. If you’re not sure how many claims you’ve made in the past — or you’ve been in your home less than seven years and are curious about the claims history of the past owner — you can find this information in the Comprehensive Loss Underwriting Exchange (CLUE) report.

Learn: 6 Ways To Lower Your Medical Bills If You Don’t Have Insurance
Explore: Californians Could See More Money By Way of Car Insurance Refunds

You can get a copy of your home’s CLUE report through LexisNexis for free once every 12 months. You can request a copy via consumer.risk.lexisnexis.com or by calling 1-888-497-0011, per ConsumerFinance.gov.

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About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of GeekTravelGuide.net, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.
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