Insurance is one of the only products you buy that you hope you’ll never have to use. Not only is dealing with a home repair emotionally draining and a hassle, but homeowners will also have to deal with increases in their insurance premiums each time a claim is made.
Here are 4 “truths” regarding what affects the cost of your homeowners insurance premium:
Making insurance claims will raise your insurance premium. Why is this? Insurance companies have a lot of studies and stats that show that after making one home insurance claim, you’re more likely to make a second and third one. Because of this, they will adjust the cost of your insurance coverage to compensate for the future potential risk. Before making a claim, always decide whether making the claim is in your best financial interest, or if it isn’t necessary.
Claims made by previous owners of your home in the past 7 years will affect the rate that you currently pay. Any prior owners’ insurance claims made over the previous 7 years can affect the homeowner insurance rate that you have to pay. Insurer views a property with multiple claims as a higher risk for having more claims in the future, and may charge you more based on that.
Simply talking to your insurance agent or company about a specific damage to your home maybe result in a higher insurance rate. According to an insurers, the fact that you inquired about a loss is an indication that a loss occurred and makes your property appear to be a bigger risk. They can raise your rate at renewal even if you never filed a claim, or if you filed one that was denied.
How to avoid this? When speaking with your insurer, always be clear as to whether or not you are making a formal claim or if you are just inquiring about whether or not damage is covered by your policy.
Always request a copy of your home Comprehensive Loss Underwriting Exchange (CLUE) when buying a home. This report will state whether or not any claims have been filed on the home you are interested in purchasing. You will need to ask the current property owner to request this report, but it is helpful because any claims made by previous owners can affect your homeowners insurance rate.
What homeowners need to know about insurance
In addition to the four “truths” listed above, there are a lot of other factors that contribute to what you pay for your insurance. Talk to your insurance agent if you have any questions regarding your coverage and your rate.
Have you experienced any other instances that raised the cost of your homeowners insurance premium?